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Is Transportadora de Gas del Sur S. A. (TGS) A Smart Long-Term Buy?

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Horos Asset Management, an investment management firm, published its third-quarter 2021 investor letter – a copy of which can be downloaded here. Horos Value Internacional gained 3.5% over the quarter and is up 33.6% in 2021, compared to 1.2% and 17.3%, respectively, in its benchmark index. Horos Value Iberia gained 1.7% over the quarter and is up 20.4% for the year, beating the gains of 1.4% and 11.3%, respectively, of its benchmark. You can take a look at the fund’s top 5 holdings to have an idea about their best picks for 2021.

Horos Asset Management, in its Q3 2021 investor letter, mentioned Transportadora de Gas del Sur S. A. (NYSE: TGS) and discussed its stance on the firm. Transportadora de Gas del Sur S. A. is a Buenos Aires, Argentina-based natural gas extractor with a $663.9 million market capitalization. TGS delivered a -15.19% return since the beginning of the year, while its 12-month returns are down by -19.08%. The stock closed at $4.41 per share on December 20, 2021.

Here is what Horos Asset Management has to say about Transportadora de Gas del Sur S. A. in its Q3 2021 investor letter:

"We added TGS, the oil and energy services company, to our portfolio. This is the fourth time we have invested in this company in our professional career, always taking advantage of the most negative moments to invest in it and obtaining significant capital gains. TGS has been providing geological, geophysical and engineering data to companies for four decades to facilitate investment and operating decisions in oil and gas fields. Unlike other competitors, TGS does not own the vessels and machinery needed to analyze these fields, which allows it to operate its business with no capital employed. This is a very important factor, because in times of capital constraint in the industry, TGS continues to generate cash. This allows the company to get through the low phase of the cycle without major issues and to take advantage of potential investment and growth opportunities as they arise.

The oil industry has been significantly underinvesting in new supply for several years, especially in deep water, after experiencing a period of low prices due to the U.S. shale oil revolution (among other factors) and as this industry clashes with the political agenda against climate change. Although we believe that the situation is unsustainable and that significant increases in supply will be needed to meet future oil demand, we do not know when that tipping point may come. Therefore, investing in a player like TGS, with a solid financial position, a management team that makes the right decisions and has historically created value for its shareholders, as well as the ability to generate cash in any environment, gives us the opportunity to benefit from the sector recovery without the risks inherent in a delay of the investment thesis of companies with higher financial and operating leverage."

Photo by Viktor Kharlashkin on Unsplash

Based on our calculations, Transportadora de Gas del Sur S. A. (NYSE: TGS) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. TGS was in 8 hedge fund portfolios at the end of the third quarter of 2021. Transportadora de Gas del Sur S. A. (NYSE: TGS) delivered a -7.55% return in the past 3 months.

You can find more than 100 investor letters from hedge funds and prominent investors on our hedge fund investor letters 2021 Q3 page.

Disclosure: None. This article is originally published at Insider Monkey.