Oil Stocks: A Real-Time Case Study in Value Investing

Oil Stocks: A Real-Time Case Study in Value Investing

December 11, 2014 Architect Academic Insights, Uncategorized, Value Investing
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I just took a snapshot of the front page of Yahoo Finance, CNBC.com, and Bloomberg.com:

 

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Bloomberg.com @ 1725 EST
cnbc
CNBC.com @ 1725 EST
Yahoo Finance - Business Finance, Stock Market, Quotes, News_2014-12-11_17-20-41
Finance.Yahoo.com @ 1725 EST

WHO WOULD EVER BUY AN OIL STOCK???

Apparently, nobody.

Energy companies as a whole have been blowing up left and right and now sell at a decent discount to the market.

OIL

Oil specific names are getting killed and they are also getting cheap (at least on an enterprise multiple basis).

Of course, cheap things can get a lot cheaper. Nonetheless, the long-term track record of buying cheap stuff is pretty clear (or here).

Here are the Top 10 cheapest energy names that are at least $2B in market cap (many have a large exposure to oil):

Ticker Name EBIT/TEV Yield Percentile Cheapness Rank
PBF US Equity PBF ENERGY INC-CLASS A 22.26% 99.90%
VLO US Equity VALERO ENERGY CORP 20.98% 99.80%
RIG US Equity TRANSOCEAN LTD 18.16% 99.70%
SM US Equity SM ENERGY CO 17.22% 99.50%
OIS US Equity OIL STATES INTERNATIONAL INC 16.72% 99.40%
HP US Equity HELMERICH & PAYNE 16.29% 99.20%
IOC US Equity INTEROIL CORP 15.61% 98.70%
WNR US Equity WESTERN REFINING INC 14.85% 98.10%
OXY US Equity OCCIDENTAL PETROLEUM CORP 14.17% 97.70%
NOV US Equity NATIONAL OILWELL VARCO INC 14.13% 97.70%

If you’re a value investor, this should be exciting–not scary…

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About the Author

Wesley R. Gray, Ph.D.

After serving as a Captain in the United States Marine Corps, Dr. Gray received a PhD, and was a finance professor at Drexel University. Dr. Gray’s interest in entrepreneurship and behavioral finance led him to found Alpha Architect. Dr. Gray has published three books: EMBEDDED: A Marine Corps Adviser Inside the Iraqi Army, QUANTITATIVE VALUE: A Practitioner’s Guide to Automating Intelligent Investment and Eliminating Behavioral Errors, and DIY FINANCIAL ADVISOR: A Simple Solution to Build and Protect Your Wealth. His numerous published works has been highlighted on CBNC, CNN, NPR, Motley Fool, WSJ Market Watch, CFA Institute, Institutional Investor, and CBS News. Dr. Gray earned an MBA and a PhD in finance from the University of Chicago and graduated magna cum laude with a BS from The Wharton School of the University of Pennsylvania.