Sandridge Energy (SD) might be familiar to Guru watchers as it has been in the past couple of years a favorite investment of Prem Watsa of Fairfax Financial.
The Sandridge story is that of an energy producer that as of 2009 was 100% weighted to natural gas. Sandridge's CEO foresaw that natural gas prices were not going to recover in the near future and made a daring transition to oil through acquisitions and identification of a very large new resource play called the Mississippi Lime.
Despite that move to oil, Sandridge is still fighting a heavy debt load and a constant need for external financing through creative strategies as it drills up its Mississippi Lime and Permian properties to increase cash flow to suitable levels.
The debt overhang has created a stock price that discounts the value of the company's assets. Here is an interview with hedge fund TPG-Axon that is now pushing to have that value realized through a sale.
The Strategy of Ben Graham – Warren Buffett’s Mentor
From 1923 to 1957 Warren Buffett’s mentor, Ben Graham, followed a strategy of investing in net-nets. He said: “It always seemed, and still seems ridiculously simple to say that if one can acquire a diversified group of common stocks at a price less than the...net current assets alone…the results should be quite satisfactory. They were so in our experience, for more than 30 years.”
Today net-nets are rare. They are collected under GuruFocus’ Net-Net Screener. GuruFocus also publishes a monthly newsletter which recommends the safest net-nets. All of these are included in GuruFocus Premium Membership.
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