1) The company in which TAVF would invest has to be extremely well financed.
2) The common stock has to be available at a meaningful discount from readily ascertainable NAV, usually over 25%.
3) We consider the Company to have favorable prospects for growth of better than 10% compounded per annum over the next five to seven years, without
diluting the currently outstanding common stock.
Then he went on and named four areas that he thinks are particularly attractive:
1) HongKong real estate developers,
2) Performing loans which we estimate to have better than 80% probabilities of remaining performing but yielding 20% or better,
3) Certain energy equities,
4) Capital infusions into undercapitalized companies.
It is impossible or highly risky for retailer investors to participate in the capital infusion deals (item 4), buying the high yield bonds (item 2), or
purchasing some real estate developer companies half way around the earth in HongKong. On the other hand, investing in the oil companies mentioned by Martin Whitman is very doable.
This is what the legendary value investor said about energy stocks:
Energy equities. The near-term outlook is terrible. The long-term outlook for oil and natural gas seems quite favorable. The common stocks of Cimarex Energy, Encana Corp. and Nabors Industries seem to be priced attractively.
Here is a brief overview of this three energy stocks:
1.Cimarex Energy Co. (NYSE:XEC)
Cimarex Energy is an independent oil and gas exploration and production company. Cimarex Energy Co. has a market cap of $3.34 billion; its shares were traded at around $40.12 with a P/E ratio of 13.2 and P/S ratio of 1.7. The dividend yield of Cimarex Energy Co. stocks is 0.6%. Cimarex Energy Co. had an annual average earning growth of 18.6% over the past 5 years.
This is a new holding for Martin Whitman, we do not have any position information on this one yet.
2. Encana Corp. (NYSE:ECA)
EnCana Corporation is one of the world's largest independent natural gas producers and gas storage operators. Encana Corp. has a market cap of $40.15 billion; its shares were traded at around $53.53 with a P/E ratio of 10.7 and P/S ratio of 1.3. The dividend yield of Encana Corp. stocks is 3%. Encana Corp. had an annual average earning growth of 34% over the past 5 years.
Whitman purchased 3.3 million shares during the first hald of 2004 and has not changed his position since then.
3. Nabors Industries (NYSE:NBR)
Nabors Industries Inc. is one of the largest land drilling contractors. Nabors conducts oil gas and geothermal land drilling operations in the U.S. and internationally. Nabors also is one of the largest land well-servicing and workover contractors in the United States. To further supplement its primary business it offers a number of ancillary well-site services including oilfield management engineering transportation construction maintenance well logging and other support services in selected domestic and international markets. Nabors Industries Ltd. has a market cap of $5.16 billion; its shares were traded at around $18.22 with a P/E ratio of 7.1 and P/S ratio of 1. Nabors Industries Ltd. had an annual average earning growth of 26.2% over the past 10 years. GuruFocus rated Nabors Industries Ltd. the business predictability rank of 4.5-star.
Whitman started to own 3.3 million shares of NBR since 2Q02 and his pisition increased to 4.6 million shares in 3Q09. Since then he sold some and by 3Q04, he stablized at 3.4 million shares.
Whitman apparently increased his holding in some energy stocks (at least for Cimarex) and now they makes one of the four areas he considers worthy investing in.
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