Quick Update on Offshore…
A low frequency but juicy strategy where the edge is government incompetence.
Let’s dig in…
Let’s quickly turn over to offshore. We’ll have more to say in a future edition, as this has gotten long-winded already, but given the equity performance we’d be remiss to not mention it. Much like Naz is peaking in the final days of December, we think offshore is bottoming. We’ve basically tossed a lot of our favorite names to secure the funds to keep averaging down on offshore. It’s been frustrating and depressing, but it’s often darkest before dawn in terms of finding bottoms. Fortunately, the fundamentals look great, and there’s been a wave of recent contract signings, along with sizable FIDs.
Look at a chart from Pareto. It’s simply too cheap. This is by far our favorite sector. We think oil is actually bottoming (look, we’re actually drawing in shoulder season with a global recession) and Trump is the first leader to want to “run it hot!!” Even China is sorta stimulating (finally).
We think that investors got over their skis in terms of expectations. If we have two solid years of consolidation, instead of new highs in charters, you’re going to see a lot of cash flow and share repurchases. You’ll continue to see older equipment cycle out. It’s all bullish for the next leg up. And yes, when analysts are too high, and need to take their estimates down, the pods sell, then short. That’s why the past 3 months have been miserable. One day, the analysts will have their numbers low enough and the pods will cover and then go long. As we wait, some VERY discounted buybacks are happening, while insiders keep buying to tighten the float. We think it’s going to work out just fine…
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