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Guy Ausmus  

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  • Sovaldi's Q1 Is A Home Run With Men On Base; Why Gilead May Triple From Here [View article]
    Decent pipeline, crazy cheap after the earnings beat today. I honestly don't understand why this name is up 20%. Well, whatever. Bought some more this morning.
    Apr 23, 2014. 11:08 AM | 1 Like Like |Link to Comment
  • SandRidge Energy: Hidden Value & Growth Are Underestimated [View article]
    RG3015: Oil and Gas wells are wasting assets, ie, production trends downward from the day of initial production. Wells reach their economic limit when sales revenues = operating expenses. The water cuts (% water produced) are very high in this play, and they increase as the well produces. Each barrel of water is cost. These wells must have very high economic limits, just on the electricity needed to lift fluid from the wells. My concern (and I probably didn't express it well) is that as the wells water out and are abandoned, the revenue to the MLP (electricity sales, water disposal fees) ends as well. Now, as long as the play keeps getting more wells, then there's a revenue stream. If drilling stops or moves far away from the assets in the MLP, then there is a revenue problem.

    I'm sure that all of this yields to a detailed analysis, but I just haven't seen it. My point is - the revenue stream can't be assessed as an annuity - some allowance has to be made for the wasting nature of the asset stream.
    Apr 23, 2014. 10:44 AM | 2 Likes Like |Link to Comment
  • SandRidge Energy: Hidden Value & Growth Are Underestimated [View article]
    Clayton: A well thought out and intriguing analysis. Allow a former oilman/present day utility executive add his 2 cents worth. The "midstream" assets are, IMHO, not that, and could be more properly thought of as "ancillary" assets to production. Splitting hairs, perhaps, but please consider the following:

    First, with respect to the electrical distribution system, some diligence is necessary regarding electrical service to SD as well as other producers. A electrical distribution system that buys power and resells it to customers sounds/smells like an electric utility. As such (and I am unfamiliar with OK utility law) it could be regulated and have a mandated rate of return imposed upon it. All it takes is a couple of cranky (and unaffiliated) oil producers that don't like the charging rate to haul the putative MLP in front of the public utility commission, demanding that they be regulated to a (lower) rate.

    Second, with watercuts like the ones experienced in this play, the economic limits of the wells must be pretty high. The revenue stream off this MLP would be a wasting one, just like the oil wells that it serves. This would seem to augur for a lower multiple.

    No numbers here, just some thoughts...

    Thanks again.
    Apr 22, 2014. 02:11 PM | 2 Likes Like |Link to Comment
  • 'Real Deal' Stocks: Volume 3 (Southwest Airlines) [View article]
    Stan: Thanks for your article and the REALDEAL screen. I tried to replicate this in MarketSmith (the IBD) tool. Was successful in getting 5 of the criteria into the screen, which cut down the universe of equities to 36 names (as of 4/9/2014). Interestingly, LUV didn't make the list. I own LUV as it has made other screens I've built, and it is a well run company.
    Apr 9, 2014. 09:22 AM | 1 Like Like |Link to Comment
  • Take Advantage Of Legislative Grandstanding By Buying Gilead At A Discount [View article]
    Good analysis. GILD is one of the names I will own indefinitely. With respect to the chart comparing PE's and other valuation metrics: I made note of the fact that PE's have expanded generally. 8.3 -> 12.8 in the instance of GILD. While GILD is a great company, great companies are only worth so much... The present PE is 35 - a ratio above the mean for other equities, I'm sure we all agree. So maybe that's the problem with this name/sector....they just need to consolidate unto some improved earnings show up. Just a thought. I'd appreciate your comments.
    Mar 28, 2014. 11:19 AM | Likes Like |Link to Comment
  • Facebook's Share Valuation: What Is The Market Expecting? [View article]
    Thank you for an even handed, numbers based look at this name. Nice job.
    Mar 26, 2014. 07:54 AM | Likes Like |Link to Comment
  • Angie's List Is Melting Down To $0 [View article]
    Thanks for this analysis. Not sure I'll initiate anything with ANGI, but you do a great service by looking at the "back side of the mountain" for a social media business. The need for these companies to grow their subscriber base really hits home when you read this analysis. It's all about MAU and ARPU. Either one flattens - bye bye company
    Feb 13, 2014. 12:48 PM | Likes Like |Link to Comment
  • US Steel: Subject To Market Despite Carnegie Project Improvements [View article]
    Dear VI: Pretty analysis, ugly subject matter.

    No wish to denigrate the progress being made at X, but structural cost cutting stories are pretty old hat for the U.S. integrated steel biz. Chasing the cost curve at X, MT, AKS is pretty much what most of the employees do all of the time. Hardly an rationale for investment.

    Let's just all admit to it: This industry hasn't returned its full absorbed costs (OPEX + DD&A) for many years. Investment in this space is tossing $ in the street IMHO. Far better to adopt the ArcelorMittal strategy of deftly buying existing facilities (Thyssen Alabama being the latest), manage them for cash, and harvest the weaker assets in their fleet.
    Jan 28, 2014. 05:12 PM | Likes Like |Link to Comment
  • US Steel - Should You Buy Now, Or Wait? [View article]
    IMHO, steel stocks, esp. Integrated steel stocks are just a proxy for the underlying commodity Hot Band (hot Rolodex steel sheet). Per the latest edition of AIST (Jan 2014 ed., p. 16), flat rolled capacity utilization is >90%. U.S. Hot rolled sheet is firm and increasing. All of the integrated sheet producers X, AKS, MT have very bullish charts. Regress stock prices against hot band prices and you'll see what I mean.

    Your thought on normalizing earnings and PE's over a 10 year cycle is a good thought as it dials out the hyper cyclical nature of this industry, as it starts to look at anomalous pricing vs. the underlying commodity. I used to do that, but it's too much work. These days, I just watch capacity utilization and the stock chart.

    Presently long X.
    Jan 6, 2014. 10:34 AM | 3 Likes Like |Link to Comment
  • SandRidge Energy: Dead Money Walking ... For Now [View article]
    David, almost all of the names in this industry have been selling off, including the much more attractive ones such as Continental Resources, EOG, etc.

    I'm not a big SD fan, mainly because they have pinned their fate to an extremely marginal resource base. That said, fair is fair. A receding tide lowers all boats or something like that.

    Other than that quibble, I agree with your central thesis. Why would you consider SD when EOG is hitting it wwwaaayyy out of the park?
    Nov 21, 2013. 08:25 AM | 2 Likes Like |Link to Comment
  • Nucor And International Paper: Early Materials Sector Prime Picks [View article]
    Ray: You may be onto something here. Hot rolled steel prices just put in a double bottom, it appears, and last week's bar on the steel price chart is at the cusp of a breakout.

    I agree that Nucor is the pick of the litter, with the possible exception of Steel Dynamics, at least from the standpoint of fundamental financial perspectives.

    That said, I hold a personal belief that steel manufacturers are less of an equity play, and more of a proxy for the underlying commodity (hot rolled steel sheet). That said, I tend to look at the overall hot roll price chart available from the CME and others. Also, I ratio the stock price to the hot roll price looking for ratio mismatches. This makes sense if you think of a steel equity as an "annuity" of steel sales.

    Thanks for the article, I always appreciate your comments.
    Oct 7, 2013. 09:31 AM | 2 Likes Like |Link to Comment
  • Cliffs Natural Resources And The Future Of U.S. Iron Ore [View article]
    Other comments correctly assess issues of transport, Fe content, and moisture. Let me add one more. Most of the mines operated by CLF are in partnerships with X, MT. In other words, the integrated mills are tied to CLF, can't substitute Brazilian ore except at the margin. And N. American mills are busy now. True, the Australian holdings are a drag on the company, and the revenue will be challenged. BUT - we are at a 5 year low, and the author did close his short... Watch what they do, not what they say...
    Mar 22, 2013. 12:01 PM | 1 Like Like |Link to Comment
  • Is ArcelorMittal's Stake Sale In Canadian Mine Part Of Its Bigger Plan? [View article]
    TwistTie: Agree with you, and I'm a former MT employee! Pretty well managed, competent employees, for the most part, but the steel biz is just a structurally impossible industry. The only reason to own any steelco is as a proxy for the underlying commodity (hot rolled steel). So it's a trade,not a core holding.
    Mar 20, 2013. 03:54 PM | Likes Like |Link to Comment
  • Is ArcelorMittal's Stake Sale In Canadian Mine Part Of Its Bigger Plan? [View article]
    Interesting to look at the entities buying the MT asset. China and Korean, seeking, perhaps, to recycle USD assets? Or invest away from Asian currencies? China, Inc. has bought a lot of hard assets in N. America...oil and gas properties have been a favorite target.

    Deal makes sense for MT given the a) their debt load, b) poor prospects in W. Europe, c) their desire to own the Thyssen asset in Alabama, and d) the miserable state of the ore industry. CLF has a $20 handle today, for pete's sake!

    If I were looking to own Fe ore reserves in the ground, I'd just go buy it where it's cheapest/transparently valued/most liquid...CLF.
    Mar 20, 2013. 12:05 PM | 1 Like Like |Link to Comment
  • Why Batteries Are Too Valuable To Waste On Solar Power Integration And Electric Cars [View article]
    Two Comments:

    1) As an engineer, I'm embarrassed that a lawyer has to do an energy balance for the rest of us. Good job John!

    2) I agree with your general theme that use of batteries in ev's, load balancers on the grid, etc. is an exercise in economic silliness, I 'll just point out that many electricity consumers are not:

    a) fully rational in their energy economic choices
    b) fully rational in their purchase of other consumer goods.

    People buy Cadillacs, Suburus, etc. All are functional, but meet different consumer needs. EV's are no different. Not low cost, certainly, but they do provide a tangible badge for those that desire to be "greener than thou".

    Don't get me wrong. Nothing wrong with green. We should do it. But as John points out, it is not happening here when you take a hard look at the #'s.
    Mar 11, 2013. 03:18 PM | 7 Likes Like |Link to Comment