WEBVTT - Caprock's Weatherley-White: Plotting for Post-Carbon Era(Audio)

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<v Speaker 1>Global business news twenty four hours a day at Bloomberg

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<v Speaker 1>This is a Bloomberg Business flag from Bloomberg World Handquarters.

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<v Speaker 1>I'm Charlie Pellett. Amazon dot com posted first quarter sales

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<v Speaker 1>and earnings the top to annle ass estimates, adding to

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<v Speaker 1>evidence of the company can make money even while investing

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<v Speaker 1>heavily and endeavors like one hour delivery and marketing new

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<v Speaker 1>gadgets like the Echo voice activated home assistant. Stocks move

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<v Speaker 1>lawer today Dow Jones Industrial Average capping the biggest drop

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<v Speaker 1>in three weeks as Apple laded afternoon sell off in

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<v Speaker 1>technology shares, overshadowing corporate deals and strong results from Facebook.

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<v Speaker 1>Facebook today rallying seven point two percent, Apple slumping three

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<v Speaker 1>point one percent. S and P five hundred index down

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<v Speaker 1>nineteen points to two thousand seventy five, a drop of

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<v Speaker 1>point nine percent down, Industrials down two hundred ten points,

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<v Speaker 1>the decline of one point two percent. Nes Stack down

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<v Speaker 1>fifty seven, a drop of one point two percent. Gold

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<v Speaker 1>up nineteen dollars now at twelve sixty nine ten, a

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<v Speaker 1>gain of one and a half percent. Crew at eight

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<v Speaker 1>five barrel crude Oil West Texas Intermediate up one point

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<v Speaker 1>two percent. I'm Charlie Palaton. That's a Bloomberg business flash.

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<v Speaker 1>You're listening to taking Stock with Kathleen Hay and Pimp

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<v Speaker 1>Box on Bloomberg Radio. This is taking Stock on Bloomberg

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<v Speaker 1>just to give you a little bit of a recap.

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<v Speaker 1>Shares of Amazon higher by more than ten percent and

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<v Speaker 1>after hours trading after the company reports first quarter results

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<v Speaker 1>earnings per share of a dollar seven that handily beat

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<v Speaker 1>the average analyst estimate of fifty seven cents. The company

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<v Speaker 1>also posting sales that were better than analysts estimated, and

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<v Speaker 1>also saying that the second quarter net sales will be

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<v Speaker 1>between twenty eight and thirty and a half billion dollars

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<v Speaker 1>as for the second quarter, and that is at the

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<v Speaker 1>high end of analyst estimate. Stock moving high. Are also

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<v Speaker 1>moving higher, and after ours trading, the shares a linked

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<v Speaker 1>In are up by more than fourteen percent or earnings

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<v Speaker 1>per share and revenue beat analysts estimates and also provided

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<v Speaker 1>healthy sales guidance. Shares of LinkedIn higher right now by

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<v Speaker 1>about fourteen percent, but on the other hand, shares of

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<v Speaker 1>Gilead Sciences down by nine percent after reporting that profit

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<v Speaker 1>missed analysts estimates and that sales of its blockbuster hepatitis

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<v Speaker 1>C treatments were less than expected once again, Shares of

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<v Speaker 1>Gilead Sciences down by nine percent. Well, how do you

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<v Speaker 1>put together a portfolio or an investment strategy given the

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<v Speaker 1>volatility in stock market performance? Let's find out from Matthew

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<v Speaker 1>weatherly White. He is the managing director of the cap

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<v Speaker 1>Rock Group to have over a billion dollars in assets

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<v Speaker 1>under management. They are based in Boise, Idaho. He can

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<v Speaker 1>be followed on Twitter at I three impact and he

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<v Speaker 1>joins us in the studio. Matthew, thanks for being here. Yeah,

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<v Speaker 1>thanks for inviting me on again. All right, so let's

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<v Speaker 1>talk about your strategy. How do you approach the selection

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<v Speaker 1>and allocation process for people that would come to you

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<v Speaker 1>for advice? And so we start off with a really

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<v Speaker 1>detailed lifetime discount of cash flow models. We get a

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<v Speaker 1>clear sense of what our clients after tax inflation rate

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<v Speaker 1>of return needs to be, and then we reverse engineer

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<v Speaker 1>the asset allocation from that perspective. But what we're really

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<v Speaker 1>interested right now in terms of portfolio construction and risk

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<v Speaker 1>management it really the energy markets, because we think that

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<v Speaker 1>the destabilization in the price of oil is instructive for

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<v Speaker 1>us when we think about plotting a course to a

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<v Speaker 1>post carbon or a carbon light global economy, and of

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<v Speaker 1>course impact investment investing. It's not just how I can

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<v Speaker 1>make money, but how can I make money and push

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<v Speaker 1>the world, help the world move in the direction I want.

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<v Speaker 1>When you say this disruption oil, just push the price

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<v Speaker 1>so low creating the postcarbon area. Might say gas is

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<v Speaker 1>so cheap, we'll never stop using oil. Yeah, it's counterintuitive,

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<v Speaker 1>and I think that for the first time, certain me

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<v Speaker 1>in my professional investing career, that relationship between the price

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<v Speaker 1>of oil and the adoption of alternative energy strategies is

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<v Speaker 1>starting to break down a little bit. And I think

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<v Speaker 1>we might actually be seeing the emerging outline of the

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<v Speaker 1>inverse of that, where the lower price of alternative renewable

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<v Speaker 1>energy actually drives the price of conventional fuels. But this

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<v Speaker 1>is not because of government subsidies. And I'm not the

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<v Speaker 1>fossil fuel industry did not enjoy subsidies or does not currently.

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<v Speaker 1>But I'm wondering, is that something that can stand on

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<v Speaker 1>its own In places? Yes, in places no, I mean

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<v Speaker 1>there are some states Arizona, for example, um X, the

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<v Speaker 1>succession of the of the feeding tariff down there. Um

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<v Speaker 1>solar power is almost at grid parity without any subsidies,

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<v Speaker 1>but the five year extension of the investment tax credit

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<v Speaker 1>sort of takes that conversation off the table. You might

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<v Speaker 1>not like the subsidies, but they're going to be there

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<v Speaker 1>for five mirrors, and that's a great tail wind to

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<v Speaker 1>the continuing continued development of solar energy. So when you

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<v Speaker 1>look at companies, who is on your radar screen because

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<v Speaker 1>you're talking about alternative energy, you're talking about a postcarbon era.

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<v Speaker 1>You're talking about the role of technology, which what does

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<v Speaker 1>incrude oil too? But it plays such a big role

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<v Speaker 1>in all these alternative sources. It's such a big part

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<v Speaker 1>of it. I think a lot of times when people

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<v Speaker 1>look at alternative and renewable energies, they think about it

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<v Speaker 1>as an energy play. We think about it as a

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<v Speaker 1>technology play. The reason being that traditional energy is a

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<v Speaker 1>commodity based business and increased utilization broadly speaking, leads to

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<v Speaker 1>higher prices. With alternative and renewable energy, it's exact opposite.

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<v Speaker 1>Increased utilization leads to lower consumer prices per unit of

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<v Speaker 1>energy created. And if I'm a consumer, and I get

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<v Speaker 1>to choose. I'm going for more use equals lower prices.

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<v Speaker 1>Pals us about emerging markets if you can, because they

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<v Speaker 1>sometimes have the ability to leap frog developed countries in

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<v Speaker 1>their technological application and also in the environmental industry. That's

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<v Speaker 1>exactly right. We've made some really interesting investments in distributed

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<v Speaker 1>power in subs in Africa for precisely that reason. If

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<v Speaker 1>you use the analog of the mobile phone and you

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<v Speaker 1>look at Sub Saharan Africa in particular, they were able

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<v Speaker 1>to effectively create a communications network without any hard lines installed.

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<v Speaker 1>We think it's the same thing with solar power. If

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<v Speaker 1>you skip the whole grid installation process and the hundreds

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<v Speaker 1>of billions of dollars necessary to build power lines across

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<v Speaker 1>the desert, then all of a sudden you have the

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<v Speaker 1>capacity to bring power, electricity light to communities that heretofore

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<v Speaker 1>have simply been off the grid. So can you give

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<v Speaker 1>us a couple of names of attractive renewable energy companies? Uh? Yeah,

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<v Speaker 1>I mean you might know that I'm not permitted to

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<v Speaker 1>recommend specific stocks are but you're not recommending them, But

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<v Speaker 1>you who are who are leaders in this field? Yeah,

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<v Speaker 1>so I'm even looking at ones like Solar City or

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<v Speaker 1>sun Edison which are cracking sun EDISD in particular, cracking

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<v Speaker 1>under the weight of debt. We think that the business

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<v Speaker 1>model still makes sense. It was just the business management

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<v Speaker 1>got a little bit out of control. Too much debt

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<v Speaker 1>growing too fast. Pretty traditional story in the markets, and

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<v Speaker 1>what kind of returns can I get if I hop

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<v Speaker 1>into this area? What are you what are you thinking? Yeah, so,

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<v Speaker 1>if you're doing an alternative renewable project energy finance typically

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<v Speaker 1>through debt, you can look at an eight handle on

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<v Speaker 1>a lot of that debt um If you're doing equity,

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<v Speaker 1>you're really taking a ride on what's going to come

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<v Speaker 1>from the Paris Accord and Top twenty one. If a

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<v Speaker 1>carbon pricing mechanism emerges, we expect very attractive returns. If

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<v Speaker 1>it doesn't in the near term, then there's gonna be

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<v Speaker 1>a lot of alatility. Is a transition from a carbon

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<v Speaker 1>intensive economy to something different. This is great news for

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<v Speaker 1>people who want to help push the renewal, editwable and

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<v Speaker 1>renewable energy front forward and makes the money. Matthew weatherly White,

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<v Speaker 1>thank you for joining us. Managing Director the cap Rock Group,

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<v Speaker 1>thank you for joining us. Day on taking Stock. I'm

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<v Speaker 1>Kathleen he has along with Pim Fox, and this is

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<v Speaker 1>Bloomberg Radio. Coming up, Bloomberg Law, brought to you by

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