Guru Prem Watsa (Trades, Portfolio)Â added 8 million shares of Exco Resources Inc. (XCO, Financial) to his portfolio in the fourth quarter.
Exco Resources is an independent oil and natural gas company that was originally incorporated in October 1955. Exco engages in the exploitation, exploration, acquisition, development and production of onshore U.S. oil and natural gas properties with a focus on shale resource plays. The company's principal operations are conducted in certain key U.S. oil and natural gas areas including Texas, Louisiana and the Appalachia region.
Exco has a market cap of $291.41 million, an enterprise value of $1.65 billion, a quick ratio of 0.56 and a dividend yield of 5.14.
According to the company’s most recent 10-K form Exco's biggest risk factors are as follows.
- "Oil and natural gas prices, which are subject to fluctuations, have declined substantially from historical highs and may remain depressed for the foreseeable future. The depression in oil and natural gas prices has, and is expected to continue to, adversely affected our revenues as well as our ability to maintain or increase our borrowing capacity, repay current or future indebtedness and obtain additional capital on attractive terms."
- "We may be unable to obtain additional financing to implement our growth strategy."
- "We are exposed to operating hazards and uninsured risks that could adversely impact our results of operations and cash flow."
- "Our operations are subject to the risks inherent in the oil and natural gas industry, including the risks of: fires, explosions and blowouts, pipe failures, abnormally pressured formations and environmental accidents such as oil spills, natural gas leaks, ruptures or discharges of toxic gases, brine or well fluids into the environment (including groundwater contamination)."
According to GuruFocus, Exco has a financial strength rating of 4/10 and a profitability and growth rating of 2/10. The company also has a few severe warning signs that are noteworthy.
Exco's Piotroski F-Score is 2, which usually implies poor business operation. The company's per share revenue has been in decline over the previous five years. Exco also has a poor Sloan Ratio which represents that the company has a poor quality of earnings.
Watsa was born in Hyderabad, India. He grew up in India and earned his bachelor's degree in chemical engineering. Watsa then moved to Canada in 1972 and achieved his M.B.A. from the University of Western Ontario. Upon graduation Watsa began his professional career at Confederation Life Co. in Toronto, and he served as vice president of Confederation Life Investment counsel from 1974 to 1983. After Watsa gained valuable experience working in upper management he decided that he wanted to found his own investing firm. In 1984 Watsa co-founded Hamblin Watsa Investment Counsel Ltd. Then one year later Watsa took over Markel Financial and renamed it Fairfax Financial Holdings. Today, Watsa is the chairman of both organizations.
Watsa has a long-term record of making successful decisions and has often been noted as “Canada's Warren Buffett (Trades, Portfolio)” for his value approach to investing. Watsa believes that Exco is undervalued; if oil prices can rise once again, Exco’s stock price will rise with it.
Cheers to your investment success.
