Replies to post #9256 on The Rising Influence of Rising Affluence

[DewDiligence]

Good move, IMO, if you have staying power. You’ll have to deal with the avalanche of analyst reports predicting that oil will drop to $25-30/bbl and stay at that level indefinitely (from many of the same people who were forecasting increasing oil prices just a few months ago).

[jbog]

Even I'm getting interest in HES but I'm going to wait awhile and see where this goes. This doesn't have anything to do with Hes per se but they are caught in the middle. It wouldn't surprise me if the sector keeps on falling for some time.

Maybe it'll settle down by Christmas then I can buy myself a After Christmas present when it's on sale.

[DewDiligence]

HES up today, despite lower oil price, on upgrade by GS.

[DewDiligence]

HES favored by Brian Rogers of T Rowe Price (from Barron’s Roundtable):

http://online.barrons.com/articles/barrons-2015-roundtable-part-2-getting-down-to-business-1422078667

…given the selloff in energy stocks, you have to own an energy name. My pick is Hess. The stock previously traded above $104 and is now in the low $70s. Hess has undergone a transformation in the past few years, after Elliott Management launched a proxy battle. The board was restructured to include people from Elliott’s slate. For a CEO whom investors doubted, all I can say is, John Hess has gotten religion.

The company has been pruning its portfolio. You’ve got to love a company that sold its Russian business two years ago for $2 billion. Today, it would be worth only $1 billion. Hess has pruned about $8 billion in assets. It has become serious about capital allocation, and has taken the share count down by repurchasing $4.7 billion of a $6.5 billion buyback authorization. The company has raised its dividend by 150%.

It is in an interesting resource position. Having sold many of its old businesses, it is now concentrated in the Bakken and Utica shale formations. It is an energy exploration-and-development pure play. The company has shed its terminal business and its gas stations.

…Everyone would have to agree that the company is in a better place today because of the proxy battle. In a sector under tremendous siege, Hess seems like a high-quality, well-managed, financially safe company that has cleaned up its act. Recent estimates have put the company’s valuation at $100 to $105 a share, compared with an asset value of $135 last summer.