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(blews out)
I am now 100% positive that I have no idea what I'm doing. Excellent post.(blews out)
Because their current sale price is predicated on oil rebounding in timeframe X. What if oil takes longer to rebound? Mostly, you're gambling on that. But that lingering question creates lots of variability.
One of the reasons they're attractive at sale prices is because of the dividend %s you can potentially lock in buying them right now. The longer oil prices remain depressed, however, the bigger the cash flow concerns become for these companies. Companies that are not bringing in adequate amounts of cash while paying high dividends will likely, sooner or later, look to ease their cash flow issues by cutting their dividends. At the point that occurs, you're likely to see an almost immediate drop in the stock's price. Meaning you not only lost the return you thought you were getting when you bought in, but you also now own something worth less than when you purchased it. In some instances, it could actually trigger immediate institutional selling, which can make the stock's decline steep.
Add to that the fact that many of these companies are also carrying substantial debt, and you now have additional risks to price in. And again, the longer oil prices remain depressed, the greater the risk of default or cutting dividends further to pay obligations.
Further, you have some short-sighted behaviors already taking place within some of these companies, where assets that would have been productive/valuable long-term are being sold to offset short-term cash requirements. The longer oil remains depressed, the more of this you'll see. Are any of these actions impactful to the long-term value/viability of the company?
I believe Todem is saying he's comfortable that the companies he has listed have minimal real risk of default with a rebound in oil prices in any reasonable timeframe, and that the possibility of long-term appreciation outweighs the short-term pain regardless of dividends. And if the dividends stay at current levels, then it's just going to add to the win. While people like siff would tell you it's OK to miss COP at an 8.5% dividend to wait for signs that a recovery has begun and maybe get them at 6% dividend, which is still really good AND gives you enough upside to be worthwhile.
What'd I miss?
Just saying what you wrote. Again, it doesn't really matter because it's not the point- the point is that many people have been saying the same "this is a once in whatever buying opportunity" for a long time now, and clearly it wasn't. It doesn't mean it won't be this time, but I just feel like you're underestimating the chance that it isn't. No worries.
Did you see the part where he said he'd "#### a brick" if it did happen?
Haha, yes it is. And I have always hated this stock. But it's a house hold name worth 0.0027 of what Apple is. And it doesn't have much competition. Just a thought.
FWIW, I saw a Bloomberg TV report a week or so back where they said that knockoff competition was very strong. They gave an example of one retailer who said that GoPro was the biggest seller by far of any other brand...but that the aggregate of the other brands was greater than sales of GoPros by themselves.
Thanks for the response. I know there is competition overseas, but GPRO seems like a name brand that people will pay more for. I'm not endorsing the company by any means, more so just wondering what the hell happened to it. A $1.5B valuation seems cheap like a FB/MSFT/AAPL could pay 2 or 3 times its market cap and not blink an eye. Not that I would buy a stock to get bought out but curious why a big company wouldn't just swoop in and pick them up.
Thanks for the response. I know there is competition overseas, but GPRO seems like a name brand that people will pay more for. I'm not endorsing the company by any means, more so just wondering what the hell happened to it. A $1.5B valuation seems cheap like a FB/MSFT/AAPL could pay 2 or 3 times its market cap and not blink an eye. Not that I would buy a stock to get bought out but curious why a big company wouldn't just swoop in and pick them up.
I don't think it could fall like that but I definitely think its possible it could get to the $60s. That would give it a market cap of about $350 B and much lower than its high in the mid $130s. It has way too much cash to get much lower than that anytime soon. But if more of their cash gets taxed and two or three years down the road Google comes up with something revolutionary who know? Im expecting Apple to stay in the $90 short time FWIW. Also, I'm the opposite of an expert
It's a niche market but I like the long term potential. At these levels if you believe in the platform then you go long. But all the management in's and out's are concerning. I think Twitter just needs to figure out how to monetize the user base much like Facebook did. Facebook is a giant though. So I would not expect Facebook growth. But there is revenue growth potential on Twitter. The stock has taken quite the beating.
Ugh. Here are the posts I'm talking about:
A few of the names that were on that list but not on this one include LINE, which is down ~90%, FCX, which is down ~80%, PBT, which is down ~50%, and several others that are way down since then. Maybe you didn't actually buy them, maybe you sold them- whatever, it doesn't matter.
Oh yeah.....LINE, FCX, HAL, RDS'A a bunch were stopped out once they hit 20% down. I remember that. I took a decent hit. Then went in again in August of 2015 on the names I mentioned. I still have OXY, just never averaged down on it. The rest were stopped out. We had a nice rebound to $60 oil after that...then the summer it tanked hard and this year so far...brutal.
I would be utterly in shock if oil stayed in the 25-35 dollar range for a decade. Inflation and demand will continue to rise. If not we are going to have a major economic collapse.
Yeah, that's all I'm saying. I don't think anyone was predicting sub $30 oil back then, it seemed crazy at the time. That's kind of the point though- I agree that the r/r is attractive here, but I'm always wary of the "great buying opportunity" type calls. There is still plenty of risk if oil doesn't rebound fairly soon.
Are you talking about oil the commodity or stocks of oil companies? Assuming it's stocks, Bob Sacamano covered a lot of the concerns a few posts back.
Buy and hold on the stocks.
I don't disagree oil can't stay lower for longer....I just don't think it stays at it's current level for an extended period of time. I am thinking within the next 18-24 months we will see oil again in the mid to high 60's.
The government has had a target on Cigarette companies for decades. It's hard to find a better stock over the last 40 years than Phillip Morris. They will just pass the buck on to the consumer.
A margin account is essentially a line of credit that you can use to buy more stock positions than you have cash bankroll (not recommended) or have in place to cover purchases while waiting on previous purchases to clear.
This was the big hangup for me when I looked into one. So it's essentially affecting my credit like a 25k line of credit through Amex would? That really pisses me off.
Not that bad. I'll explain more after I get done terrorizing the all you can eat shrimp special in port aransas
I would look to get out on any real rally to the upside. The stock is under immense debt pressure. It's a pretty incredible story considering the amount of assets they do have. But the oil acquisitions have bit them really hard.
