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Chanos bearish on Exxon

  • Exxon (XOM -0.2%) "increasingly looks like a value trap," says Jim Chanos at the Reuters Summit. "For many of the oil majors, it is becoming increasingly difficult to finance buybacks and dividends as cash flows decline ...  It isn't the same cash flow generating business it used to be."
  • Of The Oracle, whose Berkshire Hathaway disclosed a 40M share stake in Exxon last week? "He's got his reasons but unmistakably the returns are dropping."
Comments (8)
  • Tom Armistead
    , contributor
    Comments (5160) | Send Message
     
    We had Larry Fink complaining US companies aren't doing enough capex. He thinks there is too much emphasis on dividends and buybacks. Oil majors are doing heavy capex.

     

    Jim Chanos is amazing, he can twist anything into a negative light. All looks yellow to the jaundiced eye.
    19 Nov 2013, 02:20 PM Reply Like
  • SteadfastValue
    , contributor
    Comments (36) | Send Message
     
    He didn't say they weren't do enough capex, he said that its getting harder to get returns on their investments and their ROIC is falling
    19 Nov 2013, 03:29 PM Reply Like
  • Robin Hosein
    , contributor
    Comment (1) | Send Message
     
    Well said and that is at the center of his concern. While the cost of capital is low at present, the relevant DCF calculations will have to be reworked after interest rates rise; which they surely will at a later stage of this economic cycle, and the NPV of these long term investments may not seem all that attractive. With improvements in the volumes of production, especially in the USA, prices for oil and gas are likely to soften somewhat as well.
    20 Nov 2013, 02:11 PM Reply Like
  • Joe Dirnfeld
    , contributor
    Comments (1128) | Send Message
     
    Last time I looked chanos was not in the forbes 400.
    19 Nov 2013, 02:48 PM Reply Like
  • JMajoris
    , contributor
    Comments (484) | Send Message
     
    Folks can make a name for themselves by dissing Warren, but nobody will remember the doubters when they are wrong so it's a safe play to doubt. (In the press that is, NOT with real $'s)

     

    Not sure that I have the expertise to debate one way or the other, so I'll just take the easy way out and default to Warren. It's tough for me to doubt 48 years of 19.8% annual returns, I don't care how old that he is.
    19 Nov 2013, 09:17 PM Reply Like
  • Value Doc
    , contributor
    Comments (726) | Send Message
     
    Chevron is a much better bet. It's also worth nothing that the tail-end / reflation stage of economic recoveries (if we ever get one) involves big up moves in oil prices. There's a nice cyclical aspect to the big oils here in addition to relative safety given how much the broader market has been bid up.
    19 Nov 2013, 03:13 PM Reply Like
  • New Low Observer
    , contributor
    Comments (2007) | Send Message
     
    With recent deals for Heinz (HNZ) and Exxon (XOM), Buffett is simply playing the inflation hedges at "reasonable" values. Probably foresees increasing inflation rates down the road.
    19 Nov 2013, 04:20 PM Reply Like
  • willggh
    , contributor
    Comments (19) | Send Message
     
    James Chanos has one of the best records among the shorts. As far as my experience goes, fundamental short analysts/funds tend to be a heck of a lot more insightful and perform much deeper analysis than most long investors.
    Buffett is one of my biggest heroes, and by far, the investor I most admire. That's probably the case for many of you too. But that does not mean that you should immediately dismiss someone whose on the opposite side of Buffett's trade, especially when we're talking about someone as accomplished as Chanos.
    21 Nov 2013, 08:18 AM Reply Like
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