Value Investing Jim Bianco warns the Fed’s liquidity injections could make the problems in the short-term funding markets even worse. He fears that the risk of a recession in the US is underestimated and he expects further downward pressure on interest rates.

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Jim Bianco warns the Fed’s liquidity injections could make the problems in the short-term funding markets even worse. He fears that the risk of a recession in the US is underestimated and he expects further downward pressure on interest rates. Posted: 25 Oct 2019 03:35 PM PDT submitted by /u/lingben [link] [comments]

Scrounging the Canadian oil microcap world to find a 50+% FCF yield stock Posted: 25 Oct 2019 06:21 PM PDT I'll be honest, I don't know if there's another catalyst for this stock except value, but at this point it's so ridiculously cheap it's hard to imagine it doesn't go up in the near term. Full disclosure, I can't buy it because I'm restricted due to my job. Also means I haven't done enough diligence to make a decision if I were to buy it. Hemisphere Energy is a microcap Canadian producer with waterflood assets in the middle of nowhere and it is not remotely a hot asset. However, they've recently tripled production with near zero declines (declines have actually been negative in the past few months). Insiders have slowly been buying, and the stock hasn't moved in three years (admittedly outperforming the rest of Canadian energy). The company is currently messaging excess cash will be allocated to repurchases, but given the nature of management teams in the industries I will never hold my breath on that. They repurchased a pretty immaterial amount of shares in August thus far. FCF yields assuming $18 Canadian diffs and a 1.33x exchange rate are (FCF yield on Mkt cap, EV): $55 – 77%, 23% $50 – 38%, 11% $45 – -1%, -1% $60 – 116%, 34% $65 – 155%, 46% This assumes a $10 million capital program to keep production flat, although that's very conservative considering low declines (sub 15%) and a $15 million capital program has thus far added 700bbls a day consistently. $18 WCS diffs is also pretty conservative in my mind given that WCS diffs have been much tighter with curtailments in Alberta, and Maya trading at a premium or par to WTI. I expect these to stay once pipe capacity is online in Canada with enough pipe capacity expected in mid 2020 to sustain current Canadian production with no new pipelines needed (though I do anticipate pipelines will be built in the near-mid term). Closest example of a transaction I know of is Cardinal Energy's 3,000 bbl/d acquisition of waterflood assets in Midale in SE SK. The purchased them for a valuation of $400 million. They were widely criticized, but even if you take a 75% haircut to that given where stocks trade today vs 2017, and assume the actual value is $100 million, that would represent a 4 bagger. Production expansion is low risk. Each production well only costs $800k CAD meaning you're not spending $10 million to find out the NPV doesn't work. There's some risk they try to drill a ton of step out wells and it's a disaster. I haven't talked to management, but it would be a question for me for them. Risks - Management's cash flow plans. I have literally no insight into this currently. The biggest risk to me is they decide to expand somewhere else in Canada unproven (Montney or Duvernay) or try a waterflood that fails miserably elsewhere. Their assets are likely too small to be bought. - Recession – the company is pretty levered. $30-$40 WTI means it's probably a BK, but that's true of pretty much every oil company. - Operational issues – The waterflood could stop working. I don't see why it would, but it's a possibility. submitted by /u/OGCanadaInv [link] [comments]

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