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Brendan O'Boyle  

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  • Legacy Reserves: The Time To Accumulate Is Now [View article]
    1. According to the annual report last year's production was sold at an average cost of around $90/barrel. With total revenues of $485M a 30% slide in prices (where we are now) will take cash flow down by ~$150M (past 2015 since most production is hedged for the next year). For comparison sake the entire distribution costs $200M annually. Their coverage ratio provides a bit of a buffer (~1.2x), but if oil prices stay this low indefinitely a cut would probably come sooner or later.
    2. Cost of debt was $50M last year. Financing is locked in until the end of the decade. Cash and short-term assets total $126M, the company did well securing financing recently and may even look for acquisitions in the current environment.
    3. I am not certain about preferred stock. All the reports I have read predated its issuance.
    4. LGCY has another year of hedged production and the better part of a year in liquidity should that run out. Past that, where we are now would probably require the distribution to be cut in half. But it's not just LGCY, as I stated above nearly half of world oil production would be uneconomical.
    Dec 8, 2014. 09:30 PM | 1 Like Like |Link to Comment
  • Why I Expect WTI To Go Back To $100 [View article]
    Finally an article on oil with some actual data...
    Dec 6, 2014. 01:11 PM | 1 Like Like |Link to Comment
  • Why I Hate Apple [View article]
    It is interesting that Apple has done quite well as the beta has fallen.

    Oil stocks like CVX and XOM have seen increasing betas for a while now and haven't fared so well.

    But maybe this is just coincident and stocks tend to be more volatile when they are going down.
    Dec 5, 2014. 04:45 PM | Likes Like |Link to Comment
  • Sovaldi Versus Abbvie Combination: Analysis Of Abbvie Combination Impact On Sovaldi Market Share [View article]
    Contrarian hit the nail on the head.

    This is what the market is afraid of, whether it plays out or not we shall see...

    The market may be irrational here, the trouble is that it is difficult to discount a completely unknown uncertainty.
    Dec 3, 2014. 11:03 AM | Likes Like |Link to Comment
  • Be Careful With Gilead - It May Be Time To Take Profits [View article]
    I was asking this question in relation to analyst expectations for the 2017 fiscal year.

    Not saying it can't happen, just that these are pretty aggressive growth projections.
    Dec 2, 2014. 10:41 AM | Likes Like |Link to Comment
  • Legacy Reserves: The Time To Accumulate Is Now [View article]
    I think I will have to revisit this position later. So far everything is going wrong...

    However, I have an extremely difficult time believing that the long-term price of oil is going to be $50/barrel. If you look at the cost-curve for oil production: ( this would expect that half of the world's oil production is going to be uneconomical.
    Dec 1, 2014. 03:11 PM | 1 Like Like |Link to Comment
  • Oneok Partners LP Bags Some Of Chevron's NGL Assets [View article]
    Good article, I've gotten into OKS with an average price of ~$48-49. Just wondering recently about the markets reaction to lower oil prices. Is this that much of a concern? The current pullback from $50 to $44 seems like a bit of an overreaction.

    Nov 30, 2014. 03:24 PM | 1 Like Like |Link to Comment
  • Hold Your Nose And Start Buying Royalty Trusts [View article]
    How are distributions from royalty trusts taxed? Are they ordinary income?
    Nov 30, 2014. 01:45 PM | Likes Like |Link to Comment
  • The Crash Of Oil Prices Could Be The Opportunity Of The Decade, Part 2 [View article]
    The only reason that you can put gas in your car is because someone profited by retrieving it from the ground.

    The idea that oil companies will not be able to make profits implies that future oil production will cease. After all, if there is no profit who is going to drill and refine oil?

    The question to ask yourself is really that simple: "In the future will I be able to buy gas?" If the answer is yes then oil companies will need to make a profit, because no one is going to give you gas for free...
    Nov 30, 2014. 01:04 PM | 6 Likes Like |Link to Comment
  • Gilead Sciences - Investigating Earnings Predictability [View article]
    Enjoyed reading this article. It didn't give much qualitative insight into how GILD is priced, but it did give an interesting quantitative framework for judging earnings variability that I hadn't considered before.

    I think investors often confuse stocks that are cheap (GILD certainly qualifies) with stocks that are safe (i.e. non-volatile). Unfortunately, the reason why a stock is cheap is often that its valuation drivers are difficult to know, which by definition increases the level of risk, at least in the short-term.

    Will enjoy reading your future articles.
    Nov 30, 2014. 11:29 AM | Likes Like |Link to Comment
  • Analyst sees beginning of the end for oil [View news story]
    Yes oil falling below $70 means no one will want to buy it.

    I went out shopping today and saw a 30% off sign. Then I ran the other way...
    Nov 28, 2014. 02:54 PM | 14 Likes Like |Link to Comment
  • Be Careful With Gilead - It May Be Time To Take Profits [View article]
    Also I just want to get investors to think about what can go wrong.

    I still worry that the AAPL comparison could be apropos. The similarity worries me:

    1. Blow out quarter then ~2 quarters the stock goes strait up
    2. 50% of revenue from one product
    3. Seems super cheap - PEG was ~0.7 forward P/E of 12x
    4. Everybody's favorite growth stock - hedge funds are super long
    5. Major competition for market share - brushed off by me among others

    700 to low 600s - what a gift buy some
    550 - crazy cheap buy some more
    500 - umm
    450 - you're kidding me
    400 - ouch

    Earnings go up, earnings can go down. New products, competition, things can go wrong.

    I speak from personal experience. If you want to own GILD great, buy some at $100 2-3% of your portfolio. Don't average down, don't sell puts and don't lose sleep at night if things go wrong. 2% of your portfolio going down 30% is no big deal.

    Just be careful saying I'm crazy thinking a stock can go down 30%. A growth stock dropping 30% is business as usual...
    Nov 27, 2014. 04:51 PM | 1 Like Like |Link to Comment
  • Be Careful With Gilead - It May Be Time To Take Profits [View article]
    Well PFE has a buyback authorization for 12.5B. About 5% of the float at the current price. Their dividend coverage ratio is 2.3 by the metrics I track, so seems like ample cushion. Just spread the divvy over a smaller float and another 2 cents seems very reasonable, probably $1.12 or 3.6% on the current price.

    No doubt GILD has more growth potential. It's cheap you know the risks. There's nothing wrong with buying GILD at $100, maybe it goes lower but if your investing period is years I'm sure you'll make money.

    I still think we see lower prices first. Mainly I have not seen many stocks bottom when half the blogosphere was pounding the table to buy.

    I know I seem like a wet blanket talking up the risks in GILD and perhaps I'm too bearish. If everything works out $150 could happen 12 months down the road. But you might think about averaging into GILD over time, I still think there is a lot of uncertainty, which hopefully will be lifted after the next earnings report.

    Who knows, maybe it's another blowout and I'll have to write an article that I was wrong to be so cautious ; )
    Nov 27, 2014. 04:39 PM | Likes Like |Link to Comment
  • Be Careful With Gilead - It May Be Time To Take Profits [View article]
    Peak sales of ABBV's drug are projected at $3B annually. That would be a bit under 30% of GILD sales. Some of the comments here seem to expect that 30-50% could be likely. It's speculative for sure, no one knows until the ABBV drug hits the market.

    You don't think this is a pretty serious threat if they undercut GILD on price and then PBMs go with the lower priced drug? Even if GILD has the superior product ESRX is really looking to set an example here.

    I'm just worried we see a pricing war I think pressure is mounting because pharma has raised prices so high. I'm concerned that $95k just isn't going to be sustainable, it's a real risk IMO.
    Nov 27, 2014. 04:14 PM | Likes Like |Link to Comment
  • Be Careful With Gilead - It May Be Time To Take Profits [View article]
    I'm using S&P's expected growth, which is probably a bit higher than consensus.

    I know it's hard to swallow, but in my experience slowing growth means a lower multiple, regardless of how cheap the stock seems.

    This is why I have a seemingly schizophrenic view of GILD. On the one hand I think it's very hard for them to hit growth forecasts, so in the short-term I'm bearish or neutral. But in the long term the stock is cheap, so as I said in the piece I think they will be a good investment longterm.

    But remember, value investing doesn't work in the short term. You need to wait at least 5 years.
    Nov 27, 2014. 02:46 PM | Likes Like |Link to Comment