Seeking Alpha
View as an RSS Feed

Ray Merola  

View Ray Merola's Comments BY TICKER:

Latest  |  Highest rated
  • Annaly Capital Management: Look At The Income On Shares [View article]
    Very well-written piece, CWMF

    The conflict-of-interest appears so obvious, I'm trying to figure out why analysts and fund managers aren't interjecting themselves into the mix. Perhaps they are and prefer to do it quietly; though the Artisan Fund managing director was a bit more public.

    Fixing the problem does not appear to be difficult. The current Annaly management agreement could be amended in a number of ways to better align investors and contract management. The issue was created by contract wording, and the problem can be solved via contract wording.

    What is causing me to rethink my investment is CEO Denahan's disingenuous remarks on the last conference call, and the Street's unwillingness to call her on it.
    Jun 14, 2015. 09:42 AM | 5 Likes Like |Link to Comment
  • Wading Into The Oil Patch? Focus On The Balance Sheet - Part I [View article]
    Good point, 12819881

    ConocoPhillips pays a better current dividend, higher yield. EOG Resources has a better dividend growth rate, about 2x COP over the past 5 years.
    Jun 14, 2015. 09:16 AM | 1 Like Like |Link to Comment
  • Wading Into The Oil Patch? Focus On The Balance Sheet - Part I [View article]
    Reasonable approach, T-time

    I bought EOG shares early this year, not knowing where oil prices were heading. I distributed about 25% of the position when the stock moved towards $100, and will likely get the shares put back to me next month at ~$90.

    Point being, while I'll trade around the fringes (a little) I like EOG for the long-haul. I believe EOG Resources will front-run the independents when energy prices improve.
    Jun 13, 2015. 03:12 PM | Likes Like |Link to Comment
  • Wading Into The Oil Patch? Focus On The Balance Sheet - Part I [View article]
    Always appreciate your clear commentary, wdchil

    Yes, during uncertain times I like to fall back on the balance sheet and best-of-breed. Kind of like a "last man standing" strategy.

    While I have no insight to the eventual outcome, I wonder if the Saudis largely engineering the "glut," they may unravel the same just as quickly.

    Often, perception is reality.
    Jun 13, 2015. 03:04 PM | 1 Like Like |Link to Comment
  • Wading Into The Oil Patch? Focus On The Balance Sheet - Part I [View article]
    Thank you, jss127

    An earlier reader caught me on the recent note amount, too! I stated the borrowed amount incorrectly. It's $990 million.

    My goodness! $990 BILLION would look more like the Federal Government versus an E&P corporation.
    Jun 13, 2015. 03:00 PM | 2 Likes Like |Link to Comment
  • Wading Into The Oil Patch? Focus On The Balance Sheet - Part I [View article]
    Roebear8

    EOG is a large independent, so the list of companies that could absorb it is relatively short. However, I've heard rumors ExxonMobil could be interested. My guess is Shell is out, BP is out, and Total is out. Of the Super Majors that leaves Chevron only.

    My guess is other outfits (like COP or MRO) would need to construct more of a merger deal. I agree with you that EOG is unlikely to have much interest in such an arrangement. If you already have the best balance sheet, the best acreage in the best basins, and a low-cost production / technical edge; why merger with an inferior partner?

    So with the exception of XOM, I suspect a M&A outcome is unlikely, but not an absolute.
    Jun 13, 2015. 02:58 PM | 1 Like Like |Link to Comment
  • Wading Into The Oil Patch? Focus On The Balance Sheet - Part I [View article]
    Thank you for the encouragement, CapeCapMgmt

    I find it difficult to time the magnitude or direction of oil prices. It's barely an educated guess. However, strong balance sheets "sit there" in plain view. It's the place to start, especially when looking at beat-up commodity / cyclical sectors.
    Jun 13, 2015. 02:52 PM | 2 Likes Like |Link to Comment
  • Wading Into The Oil Patch? Focus On The Balance Sheet - Part I [View article]
    Good point Carl

    EOG management wasn't happy with the hedges going into 2015. My understanding is the company was going about finding someone who could better manage that part of the business.
    Jun 13, 2015. 02:49 PM | 1 Like Like |Link to Comment
  • Wading Into The Oil Patch? Focus On The Balance Sheet - Part I [View article]
    Thank you for the added color, Carl

    "Being there first" is another direct advantage EOG has over some of its competitors. This is reflected in some of the acreage secured early-on, as well as highly favorable terms and conditions found on some older leases.
    Jun 13, 2015. 02:46 PM | Likes Like |Link to Comment
  • Waiting For A Further Dip To Add To My Position In Procter & Gamble [View article]
    I have a starter position in PG, but am bouncing around on what to do next.

    On one hand, I believe the divestiture process is a good thing, so long as the cash is used to sop up shares and keep EPS and CF/S up. As a long-term investor, currency worries don't bother me, though these could hold down the stock for awhile; especially if after the Fed raises rates we see more overseas carry-trade flock to U.S. greenback.

    However, moribund organic growth in some big P&G segments concerns me, and I believe Fed tightening will have a general negative effect on all Consumer Staples / Dividend stalwarts.

    I'm ok on valuation with P/E 20x, as this is aligned with the long-term. The other metric I watch is P/S. Here the current ratio is 2.65x; I'd like to see 2.5x or so.

    Good article, thank you.
    Jun 13, 2015. 09:05 AM | 5 Likes Like |Link to Comment
  • Wading Into The Oil Patch? Focus On The Balance Sheet - Part I [View article]
    Good catch, Samuidavid

    Yes, I meant $990 million.

    As with any cyclical stock, patience is a key. Slowly building a position (and even distributing/accumulation within the cycle) can generate good returns. I wish the EOG dividend was a little higher, but no one can complain about the dividend growth rate.

    While I have absolutely no crystal ball, my intuition says that the shares you purchased in the mid-$80s will be the cycle low. I based this upon the view that oil will not return to the low $40/bbl range again.
    Jun 13, 2015. 08:45 AM | 3 Likes Like |Link to Comment
  • Wading Into The Oil Patch? Focus On The Balance Sheet - Part I [View article]
    O&Gspec

    Correct.

    EOG management captured much of the best acreage, and they have a lot of it. The Eagle Ford, Bakken and Permian are all home run basins for the outfit. By contrast, other companies in these same formations have nowhere near the production; and never will.

    Jun 13, 2015. 08:41 AM | 1 Like Like |Link to Comment
  • Wading Into The Oil Patch? Focus On The Balance Sheet - Part I [View article]
    Thank you, vicad

    Plenty to pick from, but watch the balance sheet closely and seek superior management teams. When investing in cyclicals, I've found going best-of-breed is far better than stretching for second-tier.

    My personal view: HES is not well-managed, nor shareholder-friendly; MUR is second-tier; MRO is a capable company, not as good as EOG; stay away from anything China. COP is a good choice along with EOG.
    Jun 12, 2015. 11:44 PM | 4 Likes Like |Link to Comment
  • Wading Into The Oil Patch? Focus On The Balance Sheet - Part I [View article]
    I like to scale in and out of any position. It's nearly impossible to time the top or bottom. Therefore, I might start a one-quarter position below $90 and leg in from there.

    Since I have been long EOG since January, I sold about a quarter of my position when shares were near $100 earlier this year; I'm now buying them back ~$90 or less now.

    I agree with you there's plenty of time, and plenty of long-term upside. No rush.
    Jun 12, 2015. 11:39 PM | 2 Likes Like |Link to Comment
  • Wading Into The Oil Patch? Focus On The Balance Sheet - Part I [View article]
    Thank you TimmiesRegular

    A little bird told me the EOG low was and will be ~$85, but who knows? Based upon management guidance, I figure the company will earn ~$0.28 a share this year; so anything is possible.
    Jun 12, 2015. 11:35 PM | Likes Like |Link to Comment
COMMENTS STATS
4,248 Comments
6,900 Likes