No. of Recommendations: 5
I own all three (SU,CNQ, OXY).
CNQ is a well managed company. SU should be alongside CNQ in valuation, but over the years have had various management misses and thus not compounded quite as well as CNQ. In time, as debt decreases and more efficiencies develop, OXY should be throwing off considerable owner earnings.
I read everything available. The prognostications are all over the place. Basically, I have resigned myself to utilize the Heisenberg Uncertainty Principle when evaluating long term petroleum demand and availability. When I coalesce the “data points cloud”, it comes up with assumptions closer to Exxon’s recent information release than to BP’s similar future projections information release.
My FIL was an astute observer and in the 1970s felt the OPEC crew were watching the purchasing value of the dollar go down (inflation) while also being aware of USA domestic oil output declining and so they facilitated a big supply shortfall to suddenly reprice oil in relation to the dollar. There are many folks way smarter than I who are voicing debt concerns. Our portfolio holdings in these three companies are motivated by having productive assets that “should” reprice accordingly in the event a similar 1970s repricing event occurs.
I’ve studied this and read what is available on sovereign currency and high national dent situations. The limited information paints a picture following the path seen in the 1990s Mexican Peso devaluation: 1. The Peso immediately bought about 60% less of what it formerly could buy.
2. Thus the value of money in bank accounts, bonds and debt notes was worth 60% less.
3. Many banks in Mexico were put to the proverbial wall, with many closing or at least wrecking the value of their shareholders.
Mr. Buffett is an astute observer and reader of financial history. Perhaps he is exiting banking holdings because he is viewing risk factors not yet seen by us commoners. At any rate, they say oil is black gold and well-managed productive companies selling cheaply seem to be a worthwhile hedge to have rather than sitting on money.
Uwharrie
