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Ray Merola

 
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  • Caterpillar Set To Report On Thursday [View article]
    No worries, Andrew

    You are entirely correct in that assertion. Caterpillar stock is driven by perception as much as reality. Thank you again for a fine summary article.
    Oct 21, 2014. 09:40 AM | Likes Like |Link to Comment
  • GM Earnings Preview: This Could Be Make Or Break [View article]
    Jaxon

    I believe you have your eye on the ball: NA margins, Europe, and forward guidance.

    Good article. Let's see what's reported tomorrow.
    Oct 21, 2014. 09:35 AM | Likes Like |Link to Comment
  • Earnings Preview: Caterpillar Q3 2014 [View article]
    Good summary Selerity

    I do have a question on business cycle. Early in the article, it's noted, "Late in the business cycle, the size and cyclical nature of the company increases in importance to the overall market and as an economic indicator."

    I am not fully convinced we are late-cycle. Typically, late-cycle is marked by higher commodity/materials prices, driven by strong industrial and consumer demand. I'm not sure we're there yet. In addition, the Fed historically tightens credit mid-and-late cycle to prevent an overheating economy. Central banks appear to be fighting deflation and weak economic growth more than overheated business and consumer demand.

    I could make an argument that we are mid-cycle. That could mean another leg upward for major industrial players like CAT; before the inevitable decline into either anemic growth or an outright recession.
    Oct 21, 2014. 09:10 AM | Likes Like |Link to Comment
  • Caterpillar Set To Report On Thursday [View article]
    Thanks for the article, Andrew

    For the record, Caterpillar 2013 sales were $55.65 billion. China sales were $3.5 billion, representing about 6.3% of the total. While China is a key growth market for CAT, it actually doesn't represent a high proportion of the overall business today.

    The media tend to overlook this.
    Oct 21, 2014. 07:55 AM | Likes Like |Link to Comment
  • EOG Resources: A Best-Of-Breed Selling Below Fair Value [View article]
    Michael_Phillips

    Great query. While I cannot speak with authority, I can state that I believe the answer to your question is "yes."

    EOG has an A- credit rating from S&P. The company already has a $2 billion revolver available. Management has been careful to ensure the debt-to-equity ratio stays peer top tier.

    It would appear that not only would EOG be one of the last domestic producers to get "sweat out" of the market, but it would also have access to credit that could permit the company to obtain additional properties at "fire sale" prices should such a situation arise.

    I may also point out that EOG has a long runway on excellent properties already in inventory, as noted on the chart included in the article.
    Oct 20, 2014. 10:20 PM | 2 Likes Like |Link to Comment
  • Intel: The Growth Strategy [View article]
    Russ

    Your INTC articles are great reads. Perhaps the most insightful comment was the very last line:

    "Maybe smartphones are not the highest priority at Intel."

    I often wondered about that.
    Oct 20, 2014. 01:58 PM | 4 Likes Like |Link to Comment
  • EOG Resources: A Best-Of-Breed Selling Below Fair Value [View article]
    TafNewToCCs

    Using Benjamin Graham's terminology: for the "defensive" investor, EOG's zero net FCF isn't the most reassuring figure. However, the company has been growing at a fantastic clip, while retaining good margins and returns. Therefore, the "enterprising" investor may find the situation acceptable if he/she believes the sound balance sheet, experienced management, and steep risk/reward profile outweigh the FCF situation.
    Oct 20, 2014. 01:34 PM | 1 Like Like |Link to Comment
  • EOG Resources: A Best-Of-Breed Selling Below Fair Value [View article]
    You are welcome, James

    I believe EOG both sold certain gas assets and "grew into" the rest. If other readers have more detailed information, please share your knowledge with us!
    Oct 20, 2014. 01:31 PM | Likes Like |Link to Comment
  • EOG Resources: A Best-Of-Breed Selling Below Fair Value [View article]
    Thanks for your take, contrarian, on a plausible global monetary policy opinion. However, I can hear a second Wall Street chorus who WANTS more QE. The fiscal conservatives (similar to the 1930s) want balanced budgets and tighter money. Others want "easy money" until inflation is securely above 2%.

    Certainly the Fed messed up big-time in 1930. However, I believe that Ben Bernanke, a student of the Great Depression, was precisely the man of the hour (2009) by charting a course exactly the opposite of what was done some 85 years ago. I think he made all the right calls; otherwise 2010 may have looked like 1932.

    Merkel in Germany is problem. It remains to be seen if she becomes the "Herbert Hoover" of the EU.

    Oct 20, 2014. 01:29 PM | 2 Likes Like |Link to Comment
  • EOG Resources: A Best-Of-Breed Selling Below Fair Value [View article]
    A self-induced crisis created by global central banks? On one hand, there are pundits that worry that all the "money printing" will create an inflationary burst. On the other hand, some folks believe that deflation is knocking at the door. I believe the latter is more likely than the former (at least for now), but the central bankers must be aware that tightening money and raising rates could trigger deflation, just like the 1930s. If so, do you believe they will do just that? Maybe......

    Another scenario says central banks continue to stay loose until inflation heads above 2 percent.
    Oct 20, 2014. 11:29 AM | 3 Likes Like |Link to Comment
  • EOG Resources: A Best-Of-Breed Selling Below Fair Value [View article]
    contrarianadvisor

    Certainly, that's what make a market. There have been fears that 2015 will be worse than 2008-09 out there for awhile now. If we revisit those days, certainly equities will be no place to be.

    What do you think will tip the U.S. into recession? While China, EU and Latin America are struggling; things here appear to be improving somewhat.
    Oct 20, 2014. 10:24 AM | 1 Like Like |Link to Comment
  • EOG Resources: A Best-Of-Breed Selling Below Fair Value [View article]
    PSalerno

    True. If one contends oil prices are down and will stay down (or go lower) for a protracted period of time, he/she will find better entry points for EOG and other energy sector stocks.

    However, as best-of-breed, EOG will take hits later and rebound faster than many peers.
    Oct 20, 2014. 09:45 AM | 2 Likes Like |Link to Comment
  • EOG Resources: A Best-Of-Breed Selling Below Fair Value [View article]
    Mr Kirby

    Thank you for taking the time to provide excellent reader commentary.

    As you pointed out, EOG is the low-cost domestic producer. While others may be "sweating it out," EOG can continue to make acceptable return-on-capital returns. $80 oil should not phase them.

    You also bring up another good point: just because the Saudis say something, it doesn't make it true. While the Saudi production costs are very low, the revenues required to fulfill its public social programs is not. The Kingdom requires ~$100 oil to make ends meet. Therefore, while reps state Saudi will defend market share and live with low prices, I wonder how long that will last.

    Another consideration is Russia. How long will Putin accept $80 oil when his economy runs so heavily on energy exports? Lots of moving parts.
    Oct 20, 2014. 09:43 AM | 6 Likes Like |Link to Comment
  • EOG Resources: A Best-Of-Breed Selling Below Fair Value [View article]
    Thanks for the kind words, markone

    Precisely right on my broader objectives today. The market run up had seen most of the good value plays dry up. The recent downturn has uncovered a few, notably in the energy sector. My experience in this area offers the following: don't follow the pundits. No one can predict the movement in energy prices any better than forecasting the future of the stock market. In the long-term, we live in a world whereas emerging economies are seeking to increase prosperity, and therefore energy consumption. For the foreseeable future, hydrocarbons will provide the lion's share of that demand.

    Halliburton and EOG appear to be 2 best-of-breed, beat-up stocks. A third for additional DD? Seeking Alpha has published a number of articles I've written about Energy Transfer Equity.

    HAL report earnings this morning. Without having gone into all the details yet, it looks like a pretty good report. Beat on top and bottom lines, dividend raised 20%. The stock: It had fallen from $72 to $48 peak-to-trough.
    Oct 20, 2014. 09:25 AM | 3 Likes Like |Link to Comment
  • EOG Resources: A Best-Of-Breed Selling Below Fair Value [View article]
    I would tend to agree that if oil falls to $40 a bbl, EOG will suffer along with most other Energy sector stocks. In hindsight, that will have provided better entry points.

    However, for a long-term investor, I don't believe a collapse in oil prices (and gas) is a sustained event; it would appear prices that low would be part of a broader, global economic recession.
    Oct 20, 2014. 09:19 AM | 4 Likes Like |Link to Comment
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