Speaker 1: Broadcasting live to New York, Bloomberg to Washington, d C.
Speaker 1: Bloomber to Boston, Bloomberg twelve to San Francisco, Bloomberg nine
Speaker 1: to the country and around the globe the Bloomberg Radio
Speaker 1: plus a Bloomberg Got Gone. This is taking stock. Oil
Speaker 1: prices are down nearly three percent today, down a dollar
Speaker 1: twenty two a barrel, the forty one fifty four. This
Speaker 1: comes after US inventory data shows that domestic inventories of
Speaker 1: crude oil and petroleum products rose last week to a record.
Speaker 1: We're gonna try to find some value looking at the
Speaker 1: energy industry right now. Let's get value from Charlie Pellock.
Speaker 1: He's in the Bloomberg newsroom with the Bloomberg Business Flash,
Speaker 1: and I think pim Fox. Let's begin with those energy stocks.
Speaker 1: We've got trans Ocean and Excel Mobile falling at least
Speaker 1: one percent. They're leading energy company's lower crude as PIM mentioned,
Speaker 1: down now buy about two point nine percent. Stocks are falling.
Speaker 1: Sm P five hundred index down by the most in
Speaker 1: more than a week. Energy producers tumbling along with the
Speaker 1: price of crude oil. We're brought to you by national
Speaker 1: realty Providers of one hundred percent satisfaction guaranteed New York
Speaker 1: City realty investments. See them at n r I A
Speaker 1: dot net SMP five hundred index down six to drop
Speaker 1: there of three tents of one percent to seventy five down,
Speaker 1: Industrials down thirty four, a drop of two tents of
Speaker 1: one percent to eighteen thousand four d az stackdown eighteen
Speaker 1: to fifty two oh six, a drop there of four
Speaker 1: tenths of one percent. To Bracco Lacos is head of
Speaker 1: Equity Strategy and Global quad Research at JP Morgan Chase Bank,
Speaker 1: and he talked about what it would take to keep
Speaker 1: markets moving higher. We do need to see I would say, one,
Speaker 1: still a relatively stabilizing dollar trend, and we need to
Speaker 1: see oil prices that continue to stabilize and not the
Speaker 1: goal let's say the forties um. And we would hope
Speaker 1: for interest rates to stay a little because if you
Speaker 1: look at this broader profits cycles has two thousand and seven,
Speaker 1: the biggest contributor to earning his growth, in my opinion,
Speaker 1: has been one factor interest expensed savings that has basically
Speaker 1: end up resulting in record high margins about ten point
Speaker 1: seven percent for SMB that was saw in the last
Speaker 1: year and right now we've got the ten year up
Speaker 1: ten thirty seconds, Zeal there one point five one and
Speaker 1: Gold up by thirteen seven game narrow four tenths of
Speaker 1: one percent. So again recapping a move law for stocks
Speaker 1: twenty eight minutes to go ahead of the close SMP
Speaker 1: down six a drop of three tenths of one percent,
Speaker 1: and the three thirty two on Wall Street. Now, let's
Speaker 1: take a look at other news from around the world.
Speaker 1: Thank you, Charlie from the Bloomberg News room. I'm Rainey
Speaker 1: in Essensio. This news update is brought to you by
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Speaker 1: Liberal groups want Hillary Clinton to reject appointments from Wall Street.
Speaker 1: Bloomberg's Bob Moon has the story. It is a page
Speaker 1: right out of the campaign playbook of Bernie Sanders. There's
Speaker 1: a promise if elected president Goldman Socks is not going
Speaker 1: to have a Secretary of Treasury for a sad administration.
Speaker 1: An alliance of fifteen progressive groups several of which backed Sanders,
Speaker 1: is pressuring the Democratic presidential nominee to keep people connected
Speaker 1: to Wall Street out of her transition team in the
Speaker 1: White House if she wins the November election. Move on
Speaker 1: dot Org, Democracy for America and other groups say rejecting
Speaker 1: people with Wall Street connections would demonstrate Clinton is serious
Speaker 1: about her promises, such as further tightening regulations on the
Speaker 1: financial industry. Bob Moon Bloomberg Radio in Turkey, president ar
Speaker 1: receipt type of air Towan is turning of the heat
Speaker 1: on the nation's banks. He says if they do not
Speaker 1: lower mortgage rates, he'll consider it an act of treason.
Speaker 1: The market average is close to fourteen percent. Air one
Speaker 1: says rates should be cut to about nine. ESPN says
Speaker 1: veteran sportscaster John Saunders has died. No cause was given then.
Speaker 1: John Saunders was sixty one years old, and the city's
Speaker 1: Department of Health and Mental Hygiene is expanding the guidelines
Speaker 1: on who should be tested for ZEKA. It will include
Speaker 1: anyone with the most common symptoms fever, a widespread skin rash,
Speaker 1: joint pain, or conjunctive vitus. Officials earlier said only those
Speaker 1: who had traveled to an affected region or their sexual
Speaker 1: partners should be tested. Global News twenty four hours a day,
Speaker 1: powered by more than twenty undred journalists and analysts in
Speaker 1: more than one twenty countries. I'm Rainy in Essensio. This
Speaker 1: is Bloomberg, Charlie, and we thank you. What again recapping
Speaker 1: Stock's law SMP five hundred index down six so drop
Speaker 1: there are three tenths of one percent to twenty one
Speaker 1: seventy five. I'm Charlie Palatine. That's a bloom Bread business flash.
Speaker 1: You're assuming to taking stock with pim Box and Katholeen
Speaker 1: Hays on Bloomberg Radio. For more than two years, strong
Speaker 1: oil production from the Organization of petroleum exporting countries and
Speaker 1: those outside the blocks such as the United States and Russia,
Speaker 1: have created a supply overhang that has dragged the price
Speaker 1: of oil down. Oil today down nearly three percent. Down
Speaker 1: A dollar and a quarter forty one dollars fifty three
Speaker 1: cents will buy you that barrel of West Texas intermediate crude.
Speaker 1: So what prices low? Are there bargains? Is there a
Speaker 1: value play? Let's find out from Bob Robodi. He is
Speaker 1: the founder and the president of Roboti and Company, and
Speaker 1: he joins me in the studio. Bob, thanks for coming in.
Speaker 1: Always great to see you. Great great tell people a
Speaker 1: little bit about your background. How long have you been
Speaker 1: doing this looking for value and energy and maybe tell
Speaker 1: us have you seen this kind of market before? I
Speaker 1: guess my first energy stock and that one of my
Speaker 1: first investments was forty years ago, so I've got forty
Speaker 1: years of history. And of course a lot of things
Speaker 1: have transpired in the oil business since then, so we've
Speaker 1: seen many things like this, you know, as they say,
Speaker 1: history does rhyme, and we've seen things a lot worse
Speaker 1: than this, and we've seen things that are pretty much
Speaker 1: analogous to this. In the meantime, it's a great opportunity
Speaker 1: to be able to buy things if you're a long
Speaker 1: term investor, long term investor and focused on deep value.
Speaker 1: Uh right, the deep value, and that is predicated on
Speaker 1: what we think the earnings power the business is. So
Speaker 1: that's what you know. It is not an asset that
Speaker 1: is cheap and below book, but as an asset that
Speaker 1: will generate cash flows that is significantly greater than the
Speaker 1: current implied value of the company. Is all right, let's
Speaker 1: talk about one just maybe as an example, you were
Speaker 1: taking a look at one of the oil drilling stocks
Speaker 1: at Wood Oceanics. Tell us about how that exemplifies your strategies. Sure, Actually,
Speaker 1: at what is the first stock I did buy in
Speaker 1: the energy business? In V six, I first bought the company,
Speaker 1: so I have a very long history with the company
Speaker 1: in the business. The one thing I will tell you
Speaker 1: that's negative about the business is UH, it is uh
Speaker 1: there are no barriers to entry in the business. And
Speaker 1: you know, one of the large players in businesses seed Drill,
Speaker 1: wasn't in business ten years ago, so that's one thing
Speaker 1: you have to bear in mind. Uh. And a number
Speaker 1: of years ago we realized that this was going to
Speaker 1: be a problem and sold down our interest. But more recently,
Speaker 1: what we think is the valuations today, Uh, we think
Speaker 1: the earnings power of the business is six dollars a share.
Speaker 1: We think we understand the fleet having invested in it
Speaker 1: for all that time, and really think fleet dynamics are
Speaker 1: supply is declining because the old vessels are not competitive,
Speaker 1: are going away, and we think the demand will be
Speaker 1: there because we think deep water exploration development is still
Speaker 1: something that is part of the major's UH. Combination of
Speaker 1: how they produce well, so that just under ten dollars
Speaker 1: a share nine dollars in eighties six cents, you say
Speaker 1: that the company is gonna earn six dollars a share. Right,
Speaker 1: the the fleet is a relatively small fleet, but it's
Speaker 1: all new equipment and so therefore it has thirty year
Speaker 1: life to it. And that's what it is if you've
Speaker 1: got supply demand balance of the fleet, and we think
Speaker 1: that that happens sometime over the next few years. When
Speaker 1: that happens, exactly, we're out exactly sure, uh, And but
Speaker 1: we also believe the balance sheet is such that they
Speaker 1: have the staying power that they're gonna be there when
Speaker 1: those earnings do come to play. All right, Now they're
Speaker 1: based in Houston. Now I'm gonna take you across the ocean,
Speaker 1: and i want you to focus on a company. It's
Speaker 1: based in London, uh, Subsea seven, but it's a Norwegian company.
Speaker 1: What drew you to Subsea seven, what drew is to
Speaker 1: Subsea seven was that with Oceanics so understanding the all
Speaker 1: shore drilling business and how all shore development works, and
Speaker 1: there is no barrier to entry in that business. Subsea
Speaker 1: seven we can trust as a business that has a
Speaker 1: barrier to entry and people don't perceive that, uh, and
Speaker 1: so we think that's a very significant part of it.
Speaker 1: We also think, of course today there's a number of
Speaker 1: positive attributes. Subsea seven has a very strong balance sheet
Speaker 1: four five hundred six hundred million in net cash on
Speaker 1: the balance sheet. It's competitors over the last few years,
Speaker 1: A couple of them have gone out of business, a
Speaker 1: couple others of badly damaged. So the competitive landscape is
Speaker 1: significantly improved for the company. The capital intensity of the
Speaker 1: business has gone down because there's plenty of vessels, but
Speaker 1: it's not a vessel based businesses and engineering uh expertise
Speaker 1: business and there are very few people there are only
Speaker 1: three people in the top tier. So those are all
Speaker 1: attributes that kind of come together that we could make
Speaker 1: it extremely low valuation, strong balance sheet, uh inside our
Speaker 1: ownership of stock, so a very compelling investment today. All right,
Speaker 1: So a sub side is seven uh so far this
Speaker 1: year still room to run. Uh sure if stocks down
Speaker 1: from twenty seven dollars to you know, it's up at
Speaker 1: eleven today. So and that's what we think. The earnings
Speaker 1: power of the business has improved in the downturn. The
Speaker 1: competitive landscape. Its further differentiated them from their competitors. The
Speaker 1: nature of fields and getting costs down and being more
Speaker 1: engineering oriented and focused means they have a higher value contribution.
Speaker 1: They partnered with UH with slumberget in the downturn too,
Speaker 1: so very strong relationships and very differentiated UH proposition to
Speaker 1: their customers. Tell us a little bit about master limited partnerships.
Speaker 1: What should people be wary of? Give you about seconds
Speaker 1: or so, sure you know. Master limited partnerships are, of
Speaker 1: course a formula for a disaster. You have capital allocators
Speaker 1: who are incented. They get fifty of the upside of
Speaker 1: the osmins they make. You have investment bankers who are
Speaker 1: great at raising capital UH. And of course, a year
Speaker 1: or two ago in this space, it was very low
Speaker 1: costs because people wore starved for yield. People didn't understand
Speaker 1: the investment risks, so it's a you know, and of
Speaker 1: course you had investors who were dying for risk. So
Speaker 1: all those things came together and then they told the
Speaker 1: story where you could have your cake you needed to.
Speaker 1: We could distribute out all of these earnings and yet
Speaker 1: grow the business. You can't do both things Capitals Limited.
Speaker 1: Thank you very much, Bob, Robody, founder and President of
Speaker 1: Robody and Company, talking about deep value in looking for
Speaker 1: oil in deep places sub Sea seven as well as
Speaker 1: Atwood Oceanics. You're listening to taking Stock. I'm pim Fox.
Speaker 1: Coming up, we'll tell you about hunting for stocks in
Speaker 1: the stock market, rather than looking for which way the
Speaker 1: market will go. This is Bloomberg. Bloomberg. Taking Stock has
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