Posts for Ticker ‘OXY’

Citi Escapes Big Bonus Issue, Unloads Phibro to Occidental (C, OXY)

Pandit Citi ImageIf you can’t take the heat, get out of the kitchen.  That is what Citigroup, Inc. (NYSE: C) has done over its Phibro commodities trading unit.  Occidental Petroleum Corporation (NYSE: OXY) has signed an agreement to acquire Phibro LLC from Citi “for approximately net asset value.”  Interestingly enough, that net asset value was not disclosed, although Occidental disclosed that its net investment would come to about $250 million.
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Posted on: October 9, 2009 – 9:32 am in Banking, Brokerage Firms, Commodities, Financial Stocks, Mergers and Buy Outs, Oil & Gas, ,

T. Boone Pickens & BP Updated Stock Holdings (ANR, APC, COG, CHK, CNX, DVN, FLR, FWLT, HAL, MEE, OXY, STR, SLB, SU, RIG, WFT)

Pickens PicThis morning we got to see the new equity holdings of T. Boone Pickens, via his BP Capital Management, L.P.,  as of March 31, 2009.  Some of the higher stakes look to be in Chesapeake Energy Corporation (NYSE: CHK), Devon Energy Corporation (NYSE: DVN), Suncor Energy Inc. (NYSE: SU), and Transocean Ltd. (NYSE: RIG).  Here is the full list of holdings for Pickens’ BP Capital with the implied value as of the reporting dat of March 31:

Posted on: May 15, 2009 – 11:37 am in Activist Investor, Insider Activity, Mutual Funds, Oil & Gas, , , , , , , , , , , , , , , ,

Top 10 Analyst Upgrades & Downgrades (APC, ATML, CBY, CEO, EXR, N, OXY, OZM, PSA, WFC)

These are ten of the top pre-market analyst calls we have seen early this Tuesday morning with more than two hours until the market opens:
Anadarko Petroleum (APC) Cut to Equal Weight at Barclays.
Atmel (ATML) Raised to Outperform at FBR.
Cadbury Schweppes (CBY) Raised to Neutral at JPMorgan.
CNOOC Ltd (CEO) Cut to Neutral at JPMorgan.
Extra Space Storage (EXR) Cut to Underweight at KeyBanc.
Netsuite (N) Cut to Sell at Piper Jaffray.
Occidental Petroleum (OXY) Raised to Outperform at Barclays.
Och-Ziff Capital (OZM) Raised to Outperform at KBW.
Public Storage (PSA) Cut to Underweight at KeyBanc.
Wells Fargo (WFC) Started as Outperform at Oppenheimer.

JON C. OGG

Posted on: May 5, 2009 – 6:27 am in Analyst Calls, , , , , , , , , ,

Oil Earnings Clear the Low Bar (OXY, COP)

oil-well-image6Occidental Petroleum Corp. (NYSE:OXY) and ConocoPhillips Corp. (NYSE:COP) reported a mixed bag of first quarter 2009 earnings this morning. Net income met analysts’ expectations, but revenue did not.
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Posted on: April 23, 2009 – 8:10 am in Earnings, Oil & Gas, ,

Oil & Energy Upgrades & Downgrades (APA, DNR, E, XOM, OXY, PXP, RDS.A, SPWRA)

oil-well-image4These are the top analyst calls we have seen in the oil patch and in the energy sector this Monday morning:

  • Apache (NYSE: APA) Raised to Outperform at Credit Suisse.
  • Denbury Resources Inc. (NYSE: DNR) Cut to Neutral at Credit Suisse.
  • ENI S.p.A. (NYSE: E) Raised to Overweight at JPMorgan.
  • Exxon Mobil (NYSE: XOM) Started as Buy at Citigroup.
  • Occidental Petroleum (NYSE: OXY) Cut to Neutral at Credit Suisse.
  • Plains Exploration (NYSE: PXP) Cut to Neutral at Credit Suisse.
  • Royal Dutch Shell (NYSE: RDS.A) Cut to Market Perform at Sanford Bernstein.
  • SunPower (NASDAQ: SPWRA) Cut to Underweight at Morgan Stanley.

JON C. OGG

Posted on: March 16, 2009 – 7:20 am in Alternative Energy, Analyst Calls, Oil & Gas, , , , , , , ,

Top Pre-Market Analyst Downgrades (ACGY, BMRN, CTCM, DENN, XOM, LF, OXY)

burning-money-pic14These are some of the top early bird Analyst Downgrades seen from Wall Street analysts this Thursday morning:

  • Acergy (ACGY) Cut to Sell at Citigroup.
  • BioMarin Pharmaceutical (BMRN) downgraded at Citigroup, Collins Stewart, and Wachovia.
  • CTC Media (CTCM) Cut To Market Weight from Overweight at Thomas Weisel.
  • Denny’s (DENN) Cut to Neutral at Merriman Curhan Ford.
  • Exxon Mobil (XOM) Cut to Market Perform at Bernstein; Cut to Equal Weight at Barclays.
  • LeapFrog (LF) Cut to Neutral at Piper Jaffray.
  • Occidental Petroleum (OXY) Cut to Underperform at Bernstein.

Jon C. Ogg
February 19, 2009

Posted on: February 19, 2009 – 7:37 am in Analyst Calls, , , , , , ,

Low Oil Prices, Yet High Oil Profits (OXY, BP, VLO, COP)

Oil_refinery_image_2Oil_well_logo_2_2This has been a very sketchy earnings season, and the crazy stock markets have offered very little help in being able to evaluate many companies.  But despite the massive drop in oil prices from over $140 per barrel down to almost $60 per barrel, we are seeing some rather impressive earnings from companies in the oil patch.  With the huge sell-offs seen in most major oil companies, refiners, and service providers may start to offer some stability where investors have seen nothing but volatility and instability. 

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Posted on: October 28, 2008 – 11:35 am in Earnings, Oil & Gas, , , ,

Drilling for Cash, Not Oil and Gas (PXP, OXY, CHK)

Oil_well_logo_2This morning Plains Exploration (NYSE:PXP) announced the sale of its oil and gas properties in the Permian and Piceance Basins for $1.25 billion to Occidental Petroleum (NYSE:OXY). This sale highlights two of the main difficulties facing mid- and small-cap energy firms.

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Posted on: September 25, 2008 – 9:26 am in Oil & Gas, , ,

Occidental To Try Enhanced Oil Recovery in Permian Basin (OXY, KMP)

Occidental Petroleum (NYSE:OXY) plans to spend $1.1 Billion on a natural gas processing plant and related pipelines. The company expects the enhanced oil recovery (EOR) program to increase it’s Permian Basin production by a "minimum" of 50,000 b/d within five years. The project ups Oxy’s developed reserves in the Permian Basin from 1.2 barrels of oil equivalent (boe) to approximately 1.7 billion boe. A very nice jump indeed.

The new processing plant will produce about 500 million cubic feet of CO2 per day, and a new pipeline will connect the plant to the Denver City, Texas, CO2 hub. That’s important, because it gives Occidental access to additional commercial supplies of CO2 if needed.

Occidental is not the only company pushing EOR in the Permian Basin. Kinder Morgan Energy Partners (NYSE:KMP) has for several years been transporting CO2 to properties it owns or operates in the Permian from its McElmo and Bravo Dome CO2 projects, which straddle the Colorado-New Mexico border. In 2007, Kinder Morgan produced almost 55,000 b/d from its Permian Basin properties, and pumped more than 600 billion cf of CO2 into the region. The company is expanding its CO2 operations, and expects to produce another 200 million cf/d. This is about five times the amount of CO2 that Oxy plans to produce.

However, Occidental’s reserves in the Permian Basin are much larger than Kinder Morgan’s, and the investment that Oxy is making now will reduce its per barrel production costs to levels similar to Kinder Morgan’s — $16.22/boe in 2007. That makes for very handsome profit margins with crude over $130.00 per barrel.

Paul Ausick
July 1, 2008

Posted on: July 1, 2008 – 9:18 am in Oil & Gas, ,

Legislation and Risks To Natural Gas Development (CHK, WMB, XTO, OXY, APA, EP, DVN)

The American Exploration and Production Council (AXPC) today released a study by Wood Mackenzie, an energy consulting firm, claiming that costs to the natural gas industry associated with the pending alterations to the Lieberman/Warner Climate Security Act of 2007 put at risk the development of US natural gas resources. The 25-member council includes Chesapeake (NYSE:CHK), Williams (NYSE:WMB), XTO Energy (NYSE:XTO), Occidental (NYSE:OXY), Apache (NYSE:APA), El Paso (NYSE:EP), and Devon (NYSE:DVN).

Here’s the money quote from the AXPC press release: "…it is likely that a significant share of
government-imposed consumer emission allowance costs assessed on processors would actually be paid by exploration and production companies in the near term as funds are diverted, contracts are renegotiated, and the market adjusts to this new commodity burden." The conclusion is that if E&P companies must pay for carbon allowances, they will spend less on production, prices for natural gas will rise, and consumers will face higher prices due to limited availability on natural gas.

Well, you can’t blame gas producers for trying, but this is akin to yelling "Boo!" during a horror movie: who cares? What the producers are probably really upset about is the Act’s restriction on how much the cost of the allowances they will be allowed to recover from customers. If emission costs are borne 100% by producers, the Wood Mackenzie study estimates that nearly 50% of projected production for 2012-2017 becomes uneconomic to produce. If 50% of emissions costs are forced on producers, up to 14% of production becomes uneconomic.

The price of natural gas for US consumers is likely to depend far more on the spot price of LNG than it is on the cost of carbon allowances. If LNG prices are high (and there’s every reason to believe they will be), the price of US-produced natural gas will also be high. The AXPC may be fighting an unnecessary battle on this issue. Congress has determined that the best way to assess carbon allowances is at the wellhead or the point of import. Once that’s done, producers, processors, and consumers are treated the same. The producers might not like it, but they may just have to deal with it.

George Soros noted that speculation is driving up energy prices, and we also saw T. Boone Pickens call for $150 per barrel for oil by the end of this year.

Paul Ausick
May 29, 2008

Posted on: May 29, 2008 – 10:31 am in Oil & Gas, Politics, , , , , , ,

Oil, Gas, and Offshore Drilling Earnings Reports Mixed (COP, CNX, DO, OXY)

CONSOL Energy (NYSE:CNX) today reported first quarter earnings of $75.1 million and EPS of $0.41. This is down from first quarter 2007 earnings of $113.3 million and EPS of $0.61. Revenue reached $1.03 billion for the quarter, up from $915.2 million a year ago. Analyst estimates averaged $0.50/share on revenue of $985.9 million. CNX has a very high P/E of 56.24, probably reflecting confidence in the company’s plans for new gas drilling. CNX also announced yesterday that it has completed initial studies for a new type of coal gasification plant in conjunction with Synthesis Energy Systems (NASDAQ:SYMX). The process uses waste coal, of which CONSOL has plenty, as feedstock. Turning garbage into cash always has a certain appeal.

Diamond Offshore (NYSE:DO) reported first quarter earnings of $290.6 million and EPS of $2.09. For the same period last year, DO reported net income of $224.1 and EPS of $1.64. Revenue grew year-over-year from $608.2 million to $786.1 million. Average analyst estimates were $2.12/share on revenue of $792.2 million. DO is contract driller specializing in deepwater offshore projects. More than half the company’s revenue and income come from its intermediate semi-submersibles. Those rigs are still in high demand. The day rate for a semi in the first quarter of 2007 was $150,000. For this quarter, the day rate has jumped to $249,000, and utilization has remained around 85%. DO also today declared a special cash dividend of $1.25/share and a regular quarterly dividend of $0.125/share to be paid on June 2 to shareholders of record on May 2.

Occidental Petroleum (NYSE:OXY) reported  first quarter earnings of $1.85 billion and EPS of $2.23, up from $1.21 billion and $1.43/share for the same period last year. Revenue for the period increased from $4.015 billion a year ago to $6.02 billion this year. Analysts estimated $1.97/share on revenue of $6.28 billion. The profit increase was almost entirely due to record prices for oil and natural gas. The company’s Dolphin project in Qatar has also come on line since the first quarter of 2007. Dolphin contributed 200 million cubic feet (about 36 million BOE) of natural gas to the company’s total production, which increased from 560 million BOE to 607 million BOE. Production from existing wells increased by 11 million BOE, just less than 2%.

ConocoPhillips NYSE: COP) reported  first quarter earnings of $4.139 billion and EPS of $2.62, up from $3.546 billion and $2.12 for the same period a year ago. Revenue increased to $54.9 billion from $41.3 billion a year ago. Analysts estimated $2.42/share and revenue of $198.6 billion. Higher prices for the company’s oil and gas contributed $558 million to the earnings increase. Refining and marketing income fell by more than 50%, from $1.136 billion in 2007 to $520 billion this year. The company blames lower refining margins and unplanned downtime at the refineries for the decrease. Worldwide crude oil refining utilization for the quarter came in at 89%, down from 94% a year ago and 95% in the fourth quarter of 2007.

A quick look at the Forward P/E for each company is interesting. CONSOL’s is 28.59; Diamond’s is 13.07; Occidental’s is 11.3; and ConocoPhillips’ is 7.87. Out of the sector as a whole, CONSOL is much higher and COP is much lower.

Paul Ausick
April 24, 2008

Posted on: April 24, 2008 – 9:33 am in Earnings, Oil & Gas, , , ,

Top 10 Pre-Market Analyst Calls (ADP, MKTX, MA, NVO, OXY, OVTI, PAYX, PCG, RAD, TER)

These are not the only analyst calls this morning, but these are the calls that 247WallSt.com is focusing on early this Tuesday morning:

  • Automatic Data (NYSE: ADP) downgraded to Neutral from Buy at Banc of America.
  • MarketAxess (NASDAQ: MKTX) raised to Neutral from Sell at Banc of America.
  • Mastercard (NYSE: MA) raised to Neutral at Credit Suisse.
  • Novo-Nordisk A/S (NYSE: NVO) downgraded to Peer Perform at Bear Stearns.
  • Occidental Petroleum (NYSE: OXY) raised to Outperform at Oppenheimer.
  • OmniVision (NASDASQ: OVTI) raised to Buy from Hold at Jefferies.
  • Paychex (NASDAQ: PAYX) downgraded to Neutral from Buy at Banc of America.
  • PG&E (NYSE: PCG) raised to Overweight from Neutral at JP Morgan.
  • Rite Aid (NYSE: RAD) raised to Overweight from Neutral at JP Morgan.
  • Teradyne (NYSE: TER) raised to Outperform at Oppenheimer.

Jon C. Ogg
February 26, 2008

Posted on: February 26, 2008 – 7:05 am in Analyst Calls, , , , , , , , , ,

Pre-Market Earnings Gappers (January 29, 2008)

We are right in the thick of earnings season and below is a snapshot of some of the key earnings reports with price changes if available:

  • Air Tran (NYSE: AAI) -$0.02 EPS vs -$0.02 estimate.
  • American Electric Power (NYSE: AEP) $0.52 EPS vs $0.50 estimate.
  • American Express (NYSE: AXP) $0.71 EPS vs $0.71 estimate; stock fell 2% after-hours.
  • Burlington Northern (NYSE: BNI) $1.46 EPS vs $1.37 estimate.
  • Cardinal Health (NYSE: CAH) $0.90 EPS vs. $0.87 estimate, lowered guidance.
  • Chattem (NASDAQ: CHTT) $0.76 EPS vs $0.65 estimate.
  • Corinthian Colleges (NASDAQ: COCO) $0.11 EPS vs. $0.11 estimate; lending changes and reimbursement changes will lower earnings in second half to make 2008 at lower-end of expectations.
  • Countrywide Financial (NYSE: CFC) posted earnings; maintained dividend; shares up 1.5% pre-market.
  • Dow Chemical (NYSE: DOW) $0.84 EPS vs $0.80 estimate;
  • Eli Lilly (NYSE: LLY) $0.90 EPS vs $0.87 estimate.
  • EMC (NYSE: EMC) $0.24 EPS vs $0.22 estimate
  • 3M (NYSE: MMM) $1.19 EPS vs $1.17 estimate; $6.2 Billion vs. $6.12B estimate; reiterated 10% EPS growth for 2008.
  • Accidental Petroleum (NYSE: OXY) $1.74 EPS vs $1.69 estimate; replaced 116% of its 2007 production.
  • SanDisk (NASDAQ: SNDK) posted non-GAAP EPS of $0.69 vs. $0.64 EPS estimate, but guidance was disappointing; stock down 3%.
  • Sepracor (NASDAQ: SEPR) trading down 7% after restatements.
  • Smurfit Stone (NASDAQ: SSCC) traded up 6% after earnings.
  • T.Rowe Price (NASDAQ: TROW) $0.68 EPS vs $0.63 estimate.
  • Unisys (NYSE: UIS) $0.04 EPS vs $0.12 estimate; although shares up almost 4%.
  • VMware (NYSE: VMW) trading down 20% or more after revenue number was light.
  • Waddell & Reed (NYSE: WDR) $0.42 EPS vs. $0.42 estimate.
  • Zoran (NASDAQ: ZRAN) traded down 22% after beating earnings but lowering guidance.

Jon C. Ogg
January 29, 2008

Posted on: January 29, 2008 – 8:22 am in Earnings, Pre-Market Activity, , , , , , , , , , , , , , , ,

Top 10 Pre-Market Analyst Calls (AEM, NILE, BP, GLDN, PCZ, MXIM, NMX, OXY, QELP, BRCD, WDC, STX, ELX, RVBD)

These are not the only analyst and research notes out there affecting stocks the morning, but below are the top research calls that 24/7 Wall St. is focusing on in pre-market trading this Wednesday:

  • Agnico-Eagle Mines (AEM) raised to Buy at Merrill Lynch.
  • Blue Nile (NILE) raised to Buy from Hold at Citigroup.
  • BP plc (BP) downgraded to Neutral from Overweight at J.P.Morgan.
  • Golden Telecom (GLDN) downgraded to Neutral from Overweight at J.P.Morgan.
  • Maxim Integrated (MXIM) raised to Buy from Hold at Citigroup.
  • NYMEX Holdings (NMX) raised to Buy from Hold at Deutsche Bank.
  • Occidental Petroleum (OXY) raised to Overweight at Morgan Stanley.
  • Quest Energy Partners (QELP) off quiet period: started in coverage as Outperform at FBR, as Outperform at RBC Capital Markets and as Outperform at Wachovia.
  • Petro-Canada (PCZ) downgraded to Underweight at Morgan Stanley.
  • BANC OF AMERICA neutral on many tech names: Brocade (BRCD), Seagate (STX) & Western Digital (WDC) both started as Neutral.  Riverbed Tech (RVBD) started as Neutral. Emulex (ELX) started as BUY.

Jon C. Ogg
December 19, 2007

Posted on: December 19, 2007 – 8:02 am in Analyst Calls, , , , , , , , , , , , , ,

Top Oil & Gas Analyst Calls (December 18, 2007)

These are the top analyst research noted that 247WallSt.com has seen in the oil, gas, and energy sector early this morning:

  • Approach Resources (AREX) started as Overweight at J.P.Morgan.
  • Atwood Oceanics (ATW) raised to Buy at Banc of America.
  • Cal Drive (DVR) started as Buy at Banc of America.
  • Diamond Offshore (DO) started as Buy at Banc of America.
  • Ensco (ESV) started as Neutral at Banc of America.
  • Grant Prideco (GRP) downgraded to Hold at Citigroup.
  • Gulfmark Offshore (GLF) raised to Buy at Banc of America.
  • Hornbeck Offshore (HOS) started as Buy at Banc of America.
  • Noble Energy (NE) started as Buy at Banc of America.
  • Occidental Petroleum (OXY) raised to Market Perform at FBR.
  • Pride International (PDE) started as neutral at Banc of America.
  • Transocean (RIG) started as Buy at Banc of America; Jim Cramer also noted this one as being one of his top 5-year stocks with earnings visibility.

Jon C. Ogg
December 18, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he produces the SPECIAL SITUATION newsletter and he does not own securities in the companies he covers.

Posted on: December 18, 2007 – 8:05 am in Analyst Calls, Oil & Gas, , , , , , , , , , , ,

Goldman Sachs Major Oil Changes (APA, FST, KWK, KGS, EP, XOM, FTO, HES, MUR, OXY, CVX)

Goldman Sachs this morning made some significant "Super-Spike" era calls where it said oil could reach $135 per barrel and noted up to $4.50 per gallon of gasoline at the pump for you and me, although its actual base targets are not at that level.  It has hiked integrated oil earnings estimates and maintaining "Attractive Ratings" on the sector to include exploration and production.  2008 and 2009 estimates have been raised for oil services and deepwater drillers, and made the following price base price assumptions for oil per barrel and natural gas ($/MMBtu):

  • 2008 $80.00/$8.50
  • 2009 $90.00/$10.00
  • 2010 $80.00/$8.50
  • 2011 $75.00/$7.50

Oil Services estimates raised 6% in 2008 and 16% 2009.  Estimates unchanged for offshore drillers due to high contract coverage in deepwater markets and increasing uncontracted supply in the shallow water market.  Increased price targets by 7% on average for oil service stocks and by 5% on average for deepwater levered drillers.

Even after Apache Corp. (NYSE:APA) was raised to Buy last week, Goldman Sachs is adding it to the CONVICTION BUY LIST, replaces Forest Oil Corp. (NYSE:FST) on the list.

Quicksilver Resources (NYSE:KWK) continued as Buy/Attractive as performed well since announcing asset sales last week.

QuickSilver Gas Services L.P. (KGS) started as Buy with a $27 target over 12 months.

Other estimates increased (partial list): El Paso (EP), Exxon Mobil (XOM), Frontier Oil (FTO), Hess (HES), Marathon Oil (MRO), Murphy Oil (MUR), Newfield Exploration (NFX), Occidental Petroleum (OXY), Petro-Canada (PCZ), Suncor Energy (SU), Sunoco (SUN), Canadian Natural Resources (CNQ), Chevron (CVX), Apache (APA).

Jon C. Ogg
September 17, 2007

Posted on: September 17, 2007 – 8:05 am in Analyst Calls, Oil & Gas, , , , , , , , , , ,

Will Berkshire Hathaway Lower Its Buyout Standards?

Berkshire Hathaway (BRK/A) may be setting its sights lower as far as the size of a merger it would pursue.  Reuters has reported that Warren Buffett gave an interview to a Swiss newspaper called Finanz and Wirtschaft saying the company was primarily interested in large takeovers.  Buffett said they would happily buy things in the $5 billion to $20 billion range, although potential targets are rare.  Buffett did note that they were confident they would be able to conclude several larger transactions soon in the interview.

We just ran several buyout targets that we widened out to fit the bill for a "whale" of an acquisition on Monday.

If Buffett looks at smaller companies then he will have a lot more to choose from.  It is somewhat surprising that Buffett has not looked at the retail and commercial banking sector since there are so many with healthy balance sheets and surpressed prices due to a temporarily inverted yield curve.  He has also failed on his promise to go big into power generation operations, and there are perhaps 5 or 6 names he could easily approach in that sector.

The truth is that if Buffett stoops down into the $5 billion to $20 billion range then there will be many opportunities for him.  Perhaps the largest reason for looking at larger deals is that he is probably concerned that he will be one-upped in a higher bid for any deal he considers in that $5 billion to $20 billion range.

Regardless of his comments, he needs to remove T-Bills as his single largest public investment at the current time.  Being too picky and just sitting on the sidelines for too long can come across as indecisive, even if you have made yourself into one of the world’s richest men. 

Jon C. Ogg
May 9, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in any of the companies he covers.

Posted on: May 9, 2007 – 7:22 am in Conglomerates, Mergers and Buy Outs, , , , , , , , , , , , , , , ,

Berkshire Hathaway’s “Whale” Acquisition; Who Could It Be?

Stocks to Watch: BRK/A, MRO, TRV, WM, ALL, LEH, CHA, REP, OXY, DOW, VLO, E, MET, BF, DB, SNP

Warren Buffett was noted this weekend as saying he is tempted to find a "Whale" of an acquisition rather than just trying to catch a big fish.  Everyone knows that Buffett has called technology a widget that he wouldn’t buy, so what could this mean?

We screened stocks with some valuations that would entail Berkshire Hathaway (BRK-A) either selling many stakes it holds in public companies or that would require it to raise capital from the markets.  In order to do this we looked at the balance sheet and decided that the company cut off mark would be somewhere in the vicinity of $35 Billion for the company to still have ample cash to operate without stretching or minimizing activities.  We decided to go up to $80 Billion as the ceiling, thinking that Buffett could probably sell the idea and considering that this amount ‘could’ still occur if he stretched it big time.  He has already said that Geography is not a barrier any longer. 
The companies that trade at $35 billion to $80 billion have price to book value ratios of Less than 2.5, Price-to Earnings ratios of 15.0 or less, forward Price to earnings ratios of under 14.0.  There are many other measures such as discounted cash flows and return on equity that we could have run, but we thought we’d see what comes up. 

Companies that did not have ADR’s were screened out, even though this may not be fair.  He has mostly stayed away from energy companies, but his PetroChina (PTR) stake made us leave this in.  He has stayed away from banks, but since he has been aggressive into insurance we decided to keep this in there.

Here are some of the companies that showed up in the screen:
Marathon Oil (MRO), Travelers (TRV), Washington Mutual (WM), Allstate (ALL), Lehman (LEH), China Telecom (CHA), Repsol (REP), Occidental Petroleum (OXY), Dow Chemical (DOW), Valero (VLO), E N I (E), MetLife (MET), BASF (BF), Deutsche Bank (DB), China Petrolem (SNP). 

Here is the problem in evaluating the companies above: If you don’t think Buffett would take on the huge additional risks in insurance or if you think he’d shy away from a bank or brokerage firm, then Buffett would need to go into the chemical companies or into energy and refining.  Even if you scale down the size to say $20 Billion, you have the same type of companies in the mix, except you bring in some metal and commodity names.

What is the biggest problem in having roughly $40 Billion in cash and equivalents?  It’s obviously trying to put the money to work.  Buffett is not under the same pressure as private equity to put his cash to work.  His track record speaks for itself, but you have to wonder about the company down the road and what its strategy will be.  How far will they diversify?  Will they diversify?  When your holding period you evaluate a business on is "Forever" it makes for some interesting problems to have.

Jon C. Ogg
May 7, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in any of the companies he covers.

Posted on: May 7, 2007 – 1:48 pm in Conglomerates, Financial Stocks, Mergers and Buy Outs, , , , , , , , , , , , , , , ,