In an earlier piece (see Did Porinju Veliyath Commit A Tactical Error …) I lamented that Porinju Veliyath is the last man standing on board the sinking ship known as Selan Exploration. Porinju’s PMS, Equity Intelligence, is the single largest shareholder of Selan Exploration with a massive holding of 5.07% of the total equity.
Unfortunately, Porinju badly mistimed his aggressive purchase of the Selan stock. He bought the stock at the peak of the crude oil cycle. Since then, crude prices have plunged and Selan has been on a steady decline. It has lost 44% on a YoY basis. Since I wrote the piece in September 2015, Selan has lost about 20%.
Porinju appears to have been in a state of denial. When Goldman Sachs predicted that crude oil prices could plunge to a low of $20 per barrel, Porinju reacted angrily and called the prediction “shameful”. Even Rakesh Jhunjhuwala’s sagely advice that he is “very bearish on oil prices” appears to have been disregarded by Porinju.
The present position is that crude oil prices have plunged below $30 per barrel. Also some experts have opined that “$20 Oil Is Now A Distinct Possibility As Chinese Demand Wanes”.
Now, in the midst of this doom and gloom, there is a ray of hope that we are at the end of the dark tunnel because Warren Buffett, the World’s greatest investor, has sent the green signal that oil prices are close to bottoming out. His Berkshire Hathaway recently bought a huge chunk of Phillips 66, a company engaged in crude oil exploration and production. Berkshire Hathaway’s total investment in Phillips 66 is worth nearly $5 Billion (Rs. 32,500 crore).
Other savvy investors are also expressing the same opinion as Warren Buffett.
Arvind Sanger, the founder of Geosphere Capital Management, was quoted as saying that he is “heavily bullish on the oil and gas sector right now” and that it is a “once-in-15-years opportunity to buy oil and gas companies at time when oil and gas prices are at such a depressed level”. He opined that the low crude oil prices are “completely unsustainable” and will be “double if not higher, in the next 12 months”.
DK Aggarwal, CMD at SMC Investments is of the same view. He cited Warren Buffett’s classic “Be fearful when others are greedy and greedy when others are fearful” doctrine in support of the theory that the time is ripe to buy crude oil related stocks.
The most important aspect is that Goldman Sachs is itself of the view that crude oil prices are bottoming out. It has also predicted a “commodities bull market” in 2016 and opined that crude oil prices could surge to $40 per barrel in the first half of 2016.
So, Porinju may in fact have the last laugh and we may someday have to compliment him for the sagacity to stay invested in Selan Exploration as per his conviction despite the opinion of the experts!
Arjun, phillips66 is refinery and marketing company they also do downstream chemicals. Phillips66 is thus buyer and beneficiary of low crude prices. Warren buffet also bought axalta coating paint company. So he is betting on low crude prices and not the other way.
Oil price is really low and has now reached cash cost. Lot of company are not able to do capex to maintain production. That will result in decline in shale oil production which can start revival in oil prices over next 1 or 2 years. In fact Goldman bought out a report saying new bull market in oil started in Fridays oil price crash saying “flat curve near cash cost is bull sign in crude oil”
Well put pritesh I was going to mention the same thing. There is a huge difference between the business operations of Phillips66 and Selan. The author of the article should research his findings thoroughly before making such bold statements. Phillips66 margins are independent of oil price fluctuations. They are able to transfer their costs to the consumer. Warren Buffett would not invest in any business where the margins have huge fluctuations due to commodity price movements. This is the only part of the article that I disagree with. Dear investor friends please make your own independent investment decisions after your own thorough research. Do not blindly follow any advice. I refrain to comment on how good or bad SELAN is as a business. Do your own reasearch people.
Which is the Indian equivalent of Philip66?
Phillips 66 refines and marketing and selling crude similar to reliance industry and all refining company like hpcl, bpcl, Indian oil, chennai petroleum etc. It also does downstream petrochemical business like reliance.
But be careful and not blindly jump on oil refinery company such as bpcl and hpcl. As this stock has already moved up lot and it is not likUSA free pricing, govt still indirectly controls pass on prices to consumer so they r not directly benefited on such low crude oil prices
To bet on Crude is a speculative trade,rather it is good to bet on oil users who are presently enjoying lower crude,But have some pricing power to pass on any uptrend in crude .Give colours to your portfolio with Paints stocks and stay away from crude speculations .
porinju vs warren buffet? warren buffet is a true value investor…
Oil not yet bottomed out. Still looking to go upto $20. Recession started already on oil rich countries so like 2008 we can see more downside in markets. Lifting ban in IRAN will create more supply in oil and demand is very less compare to production. In this time please do not give this type of articles. Some people want to come out from Selan Exploration at higher price. small and retail investors will buy with this inspiration of article and big investors will exit. Guys be careful. Please do not invest for sometime Metal,steal, spinning and Oil stocks.
my 2 cents- best space would be consumer, fmcg, liquor, earnings may continue to grow in these sectors for 2016,2017…
selan has sales of lowly 65Cr.still overvalued @ 175. our intrinsic values stands 134Rs..most importantly they are almost stagnant from 2009..else would have been a good bet…
In these uncertain markets one of the best stock to invest is “Lincoln pharma” invest after due diligence.always do your own analysis before investing as you alone are responsible for your profit or loss. details are as below-
Lincoln Pharma is definitely on growth path it is a potential mega cap company. mega caps are stocks like sun pharma and lupin in pharma space. in short term lincoln is heading towards 300
Latest updates –
1) New Launches
Launched the Dermatology Division with a team of approximately 50 people
Introduced 15 products under this division
Completed the expansion of Unit 1 (Tablet, Capsule & Ointment), which resulted in trebling of the current capacity Also upgraded the existing facility to enhance efficiency
3)Expansion of wind mill capacity
Completed setting up of a new wind mill (capacity: 2.1 MW); 5 million units of electricity for captive consumption
Significant reduction in fuel cost in the coming quarters
4)New facility to cater to international markets
Plan for setting up a beta-lactam antibiotics manufacturing plant is on schedule
Purchased land; construction expected to begin by December
5)Field force expansion and entering into new international geographies
Added approx. 80 members to the field force in H1 FY2016 to increase capacity utilization in the domestic market New approvals from Namibia, Sudan, Ethiopia, Zimbabwe, Yemen and Libya to increase international volumes
company has high potential and can become mega cap company as predicted by well known brokerage house.
Lincoln pharma in short term will see 350 plus mark and in long term multifold returns from CMP(current market price)
lincoln pharma is strong buy below 250
22-01-2016 12:03:49 AM: +91 98906 71220: questions on promoter integrity of Lincoln pharma.. the Tanzania ban was already in place since a year ago then why company informed just few days back??
See the report date….
so buy lincoln selan reliance and reap the fruits
I personally feel we hv completed supercycle wave 1 at 30024 and we are in wave 2 and this can go as low as 7697 once again by mid 2017 so buy in sip at the end of every quarter
Huh? Did the author do any research comparing two different companies in two different areas?
In 2012, Phillips 66 was spun out of oil giant ConocoPhillips with the objective of focusing investment on Phillips midstream assets — that is, the pipelines, rail terminals and processing plants that move oil and gas from the field to Phillips refineries.
So, Phillips 66 is NOT an oil exploration company like Selan, which Warren Buffet is buying.
Read more here: http://www.forbes.com/sites/christopherhelman/2015/09/01/deal-flow-and-synergy-why-warren-buffett-likes-phillips-66/#7cf79946fae514498bcbfae5
Under what name does PMS have invested in Selan…i dont see any group with more than 2.7 %in non promoter category….did PMS got out of it?
madhu PMS means Portfolia Management Services. Its not a Person or Company.
PMS is Equity Intelligence, which is nowhere to find in the Dec2015 SHP.
recently, i saw one tweet regarding selan and i also convince the said price to enter as per the current fundamental
Lincoln pharma crashed 2day BTW I have never heard of it. Also check the portfolio of buffet he has mostly quality stocks IBM coke Microsoft etc etc . remember you are buying the company not the investor of the company
logically speaking as alternative sources of energy keep increasing the need for oil will go down… i don’t think anyone can deny this…
the question is when this will happen…. personally i felt it would happen in 20 or 25 years but science has always surprised us and now with solar power making huge strides… i think the oil market cartel will do a last ditch stand to hold up but eventually will have to give up… solar power is limitless…when it ends life will possibly end ….or we may find new ways to live without the sun… then again science will surprise us…..
We have heard the same type of arguments when oil was near its peak that it can only go up because of its limited quantity, maybe bottom is near☺
Surprising why Arjun has not replied anyone here..?
Selan Vs Phillips 66 comparison is not correct, Castrol India can be an option along with other chemical companies like paints,may be tyres and plastics