Tag Archives: Equities

Why Oil Is A Broken Market Ripe For A Short

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Posted by in Commentary, Macro Analysis

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Summary:

  • Oil is trading at a premium based on historical data points.
  • U.S. supply is beginning to come online again.
  • Increased oil demand Oil for energy demand in the EU is likely only temporary.
  • Global recession risk is rising.
  • The Iran deal is likely to close.

For some time now, I have believed the oil market to be broken, where data is ignored and outdated core beliefs of the market rule. I first took action on this belief on March 15, 2022, when I initiated a short position in WTI crude (CL1:COM) using WisdomTree WTI Oil 3x Short Daily ETP in USD ($3OIS) through a margin product. I have since sized up my position on 13 separate occasions. I don’t usually disclose my position in such detail, but I believe such a controversial issue must be read with disclosures in mind.

Before diving in, I need to clarify that this article will focus on WTI crude prices, and any reference to oil price uses the price of crude.

For ease of reading, this article will be broken into seven separate points:

  1. Oil is trading at a premium based on historical data points
  2. U.S. supply is beginning to come online again
  3. Global recession risk is rising
  4. Increased oil demand for energy in the EU is likely only temporary
  5. The Iran deal is likely to close
  6. Russian oil is still flowing
  7. Conclusion and risks to thesis
Click here to read the rest on Seeking Alpha

Excel Source Documents

  1. 01-04-1985_to_08-05-2022_Weekly_Analysis_of_U.S._Crude_Oil_Stockpile_Days_Versus_Futures_Price.xlsx
  2. 1972_-_2021_Oil_Production_v_consumption_v_population_v_median_annual_price.xlsx
  3. 1983_to_08-08-2022_Weekly_U.S._Field_Production_of_Crude_Oil.xlsx

Disclosure: I/we have a beneficial short position in the shares of CL1:COM either through stock ownership, options, or other derivatives.

Additional disclosure: While I express my opinion in this article, only you can determine if a specific strategy is right for your portfolio. You should always do your own research before buying, selling, or shorting any stock. Any charts, graphs, or tables not specifically credited to another individual, company, or institution were created by the author using his own research.

While I am not directly shorting crude oil, I have invested in a 3x reverse daily ETF using a margin like product that enables me to profit when crude oil decreases in price. This is an incredibly risky method of investing even experienced investors should think hard before initiating.

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Chasing The Elephant Episode 4, Part 1: Risk And The Amazon Story

11 Monday Dec 2017

Posted by in Individual Equity Analysis

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  • The fourth episode (part one) of the first podcast exclusive to Seeking Alpha: Chasing the Elephant.
  • Interview with Seeking Alpha Contributor Eric Parnell discussing his analysis of Amazon.
  • Roundtable discussion on Amazon as an investment and the high multiples some companies are currently enjoying and the risks those entail.
  • Featuring Seeking Alpha Contributors Russell Katz (host), Richard Berger, Yale Bock, and Eric Parnell.

To listen to the podcast click here:

Chasing the Elephant Episode One: Let the Fed Eat Cake

21 Saturday Oct 2017

Posted by in Individual Equity Analysis

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We have released the first episode of the new bi-monthly (fortnightly) exclusive Seeking Alpha podcast! This podcast is the first to be exclusive to Seeking Alpha ever so, please check it out and let me know your thoughts.

  • Interview with Seeking Alpha Contributor Yale Brock on his long pick The Cheese Cake Factory.
  • Roundtable discussion on the upcoming Federal Reserve meeting and the implications of a rise in interest rates.
  • Featuring Seeking Alpha Contributors Yale Bock, Richard Berger, and host Russell Katz.

https://seekingalpha.com/article/4115130-chasing-elephant-episode-one-let-fed-eat-cake

Seeking Alpha Consolidated Water: The Water Play Of Your Dreams

13 Sunday Aug 2017

Posted by in Individual Equity Analysis

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By: Russell Katz

Why Water?

As the world changes, so do investment opportunities along with it. What once was abundant and boring is suddenly the catalyst of wars. As investors, it is our duty to be constantly vigilant and willing to change our entire investing strategy if the need arises. I reached this moment of clarity when the price of oil first collapsed. As someone who mostly covered oil and natural gas exploration, I decided to become more opportunistic and stop looking for ideas that kept me living under a rock (first and last shale joke). This led me to come across information regarding the drastic changes our planet faces and may soon consider the new normal. The most startling figure I found was an estimate by the 2030 Water Resource Group, an organization quoted by the UN and other key research publications, that by 2030 the world will be facing a 40% global water deficit unless there is either a drastic increase in supply or a severe decrease in demand. Neither of these scenarios are likely to occur as the vast majority of the world’s water supply comes from rain reliant systems such as rivers, reservoirs, and groundwater systems. Population growth, on the other hand, has eliminated the possibility of any demand decrease. The once effortless and cheap water supply has been stretched to the breaking point forcing countries to consider alternatives.

To read more please go to Consolidated Water: The Water Play Of Your Dreams

Why I Loved Consolidated Water’s Second Quarter Report

14 Friday Aug 2015

Posted by in Individual Equity Analysis

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Consolidated Water (CWCO) is a company that operates, builds, maintains, and upgrades water desalinization plants.  The company is based in the Cayman Islands and operates in the Cayman Islands, Bahamas, Belize, British Virgin Islands, and Bali with plans in motion to expand into Mexico.  Below is a summery of their Q2 2015 earnings report.

  • Income

Consolidated Water’s net income for the second quarter declined year over year from approximately $2.8 million to $2.25 million.  Looking at these numbers alone they may seem like cause for concern; but when you break them down you see that Consolidated Water is a stable long-term growth company with huge potential.

-Energy Costs

Due to Consolidated Water’s pricing model the company passes off increases in energy prices to the consumer.  Since energy prices were considerably lower this quarter than Q2 2014, they did not charge as much thereby decreasing overall revenue.

-Retail Segment

Year over year gross profit increased $813 as water sales were consistent when compared to Q2 2014 and the cost of retail revenue, due to decreased energy costs, offset the decrease in retail revenue.  The retail segment of Consolidated Water’s businesses operates the water utility for the Seven Mile Beach and the West Bay area of the Grand Cayman as well as selling water to resorts in Bali, Indonesia.

-Bulk Segment

Year over year revenue decreased from $10 million to $8.2 million.  CEO Frederick McTaggart explained this drop in revenue during their Q2 2015 conference call:

Bulk segment revenues declined from $10 million in the second quarter of 2014 to $8.2 million this past quarter, again, on significantly lower energy pass-through charges to our customers and to a lesser extent, lower volume sales in our Bahamas and Cayman bulk water operations.

What Frederick McTaggart was discussing above was the Bahamas Water and Sewerage Corporation, Consolidated Water’s client, continued water conservation efforts.  These efforts caused a 9% drop in volume sales.  The 5% drop in volume sales from the Grand Cayman was due to increased rainfall which causes less water to be needed for irrigation.  The bulk segment of Consolidated Water’s operation supplies water to government utilities in the Grand Cayman, The Bahamas and Belize.

  • Mexico

Consolidated Water is attempting to expand their operations further into Central America through building a 100 million gallon a day seawater desalination plant in Rosarito Beach, Mexico.  They are currently awaiting the committee who decides whether to move forward with the plant final decision on their proposal however, Consolidated Water is confident that it will get approved.

  • Balance Sheet

Consolidated Water’s cash and cash equivalents increased from $36.755 million in Q1 2015 to $39.323 million in Q2 2015 and debt continued to decrease with their demand note payable decreasing from $8.5 million to $8 million.  (For information on what a demand note payable is click here)  Total debt, the demand note payable plus Accounts payable and other current liabilities, totaled $12.231 million down from $13.414 million in Q1 2015.

  • Conclusion

Consolidated Water is a long-term growth company and are perfect for any value investors portfolio.  Cash and cash equivalents continue to increase while debt continues to decrease.  In addition they are a company who is continually expanding as shown with their maneuver into Mexico.  The stock pays a solid dividend of $0.30 (2.52%) a share.  In addition the industry they are in is one of continual increased importance.  Recently the United Nations released a report stating that by 2030 the world will only have 60% of the total usable water that we need.  Water is a commodity that is necessary for the human race’s survival and as the population of the world continuously grows so will Consolidated Water’s business.  They are the definition of a value investment.

Disclosure: While I express my opinion in this article, only you can determine if a specific stock is right for your portfolio. You should always do your own research before buying or selling any stock.