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Investment Advisor
Long Only Energy
The Gator Energy Portfolio invests in 30 companies in the Energy sector of the market. The model uses the idea of “Peak Oil” (described as “the point in time when the maximum rate of global petroleum extraction is reached, after which the rate of production enters terminal decline”) in its investment strategy. Therefore, the only way to adjust demand down for energy will be for oil prices to increase drastically. This will drive all energy prices higher in the future, so investments are made in companies that will benefit the most from higher energy prices.
The model takes a long-term view of higher energy prices to help build the portfolio stock by stock. The model buys energy companies that will benefit the most from higher prices in the long-term. This leads to companies that have large undeveloped resource bases and/or are reinvesting in their low cost exploration divisions. The model tends to avoid the large integrated oil companies and the refiners.
Fundamental research is conducted on each of the prospective investments to determine earnings. Earnings releases and earnings conference call transcripts are used as well as recent investment presentations and other investor’s thoughts about the company. Furthermore, calls are scheduled with company management to clarify any questions. Finally, an investment thesis is created as an internal report and comparisons are made between the prospective investment against all existing holdings.
The model will own 30 companies at a time. New positions are typically given 3.5% weight. Positions are rebalanced if it becomes too large. Positions that get small tend to have underperformed, so unless it is determined that the original investment thesis is still valid, the model will not add to smaller positions.
The sell discipline is to exit positions if the strategic positioning of the company has materially changed. The strategic change could be due to an acquisition or a CEO change. New holdings are constantly evaluated in the portfolio, so existing positions must constantly "compete" for investment capital against potential positions.
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- Approach Fundamental , Sector Focus
- Asset class Equity
- Geography US
- Sectors Energy
Model commentary
Publicly Traded PE Firms: Business Franchises Not as Volatile as Their Stock Prices
13 October 2011
The current sell-off in the stock market is presenting a second opportunity to buy the publicly traded private equity firms.
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