Is the World Finally Waking Up to Peak Oil?

This front page article on the Financial Times website suggests that the reality of our situation may finally be sinking in.

I don’t think it’s time to panic and start buying every energy company in sight.  The market has a way of faking itself out, as well as anyone sucked into the madness of it all.  Perhaps the media will write a few articles about the massive finds in Brazil (buried under the greatest technical challenges yet) or the Gulf of Mexico, etc in order to assuage the world’s fears.  This would be a great favor to smart investors.

In short, I am not abandoning my margin-of-safety requirements.  While I fully believe that rising energy prices will lift all boats, I am still on the lookout for undervalued assets and/or solid cash earnings when investing in energy companies.  Maybe I’ll raise my base prices in the valuation process but otherwise, plan on maintaining discipline.

2 Responses to “Is the World Finally Waking Up to Peak Oil?”

  1. Bill Seaquill Says:

    David,

    I read your recent article on PWE and was impressed with your financial analysis of the company. I am also long in PWE but thinking that perhaps now is a good time to call it a day.

    Do you believe that this trust is worth holding? I think that Jack Yetiv is overly optimistic since his assumptions are based on oil continuuing to escalate. Not necessarily so as you imply above.

    Thanks in advance if you would comment on PWE going forward.

  2. Davy Bui Says:

    Hi Bill,

    I can’t comment on your personal portfolio nor give you advice on how to manage it.

    As to whether the trust is worth holding, it depends on the situation but I would say yes, for the most part. In my own account, I sold a third of the position because

    1) I run a focused portfolio and PWE was a large chunk of it due to me buying throughout all of last year,

    2) The first tranche I bought @ $30.11, had held for over a year so capital gains treatment was favorable. Now my cost basis is much lower (though I continue to show my initial entry point on the portfolio page).

    3) The lower cost basis allows me a little more leeway in holding the stock. My remaining cost basis ranges from $26 – $28. Once I hit my year mark, I’ll evaluate again.

    Hope that helps.

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