James West, Senior Managing Director, Evercore ISI
James West is a senior managing director at Evercore ISI responsible for research coverage of the drilling and production of oil and natural gas and detailed fundamental research on companies involved in solar and wind power, battery and power storage technologies, and hydrogen.
The LNG sector of downstream energy is one of the hottest right now due to the global sanctions directed at Russia. This creates an opportunity for North America to support its European allies through increased shipments of LNG to European markets. This in turn will create tremendous demand for support for the extraction of natural gas, processing it to LNG, and efficient delivery to LNG terminals.
“The ones that we think are the best positioned for what’s happening in North America — that would be the companies in the fracturing industry, which would be companies like Liberty (NYSE:LBRT), NexTier Oilfield Solutions (NYSE:NEX).
They are experiencing somewhat of a short squeeze on their equipment where their high-spec equipment, their ESG-friendly dual fuel and electrical equipment are basically sold out and a pricing recovery is underway today.
The other area in North America is the land drillers and we think three of the high-spec land drillers are really best positioned to perform well in here and see increasing day rates.
Day rates have moved from the high teens to the low-20s and now we believe fully loaded including directional drilling services, etc., are now moving closer to $30,000 per day.
That would be Helmerich & Payne (NYSE:HP), Patterson-UTI (NASDAQ:PTEN) and Precision Drilling (NYSE:PDS).
On the flip side, there are a couple of niche technology companies that we like. ChampionX (NASDAQ:CHX) is one of those.
It’s a leader in artificial lift and production chemicals.
Bristow Group (NYSE:VTOL) is the leader in offshore transportation.
And then we do like Chart Industries (NASDAQ:GTLS), which is a leader in cryogenics, which will be heavily used in some of the transition technologies, such as hydrogen, carbon capture and then also in the water treatment area — plus they’re a big player in LNG.
We think LNG is going to be the major transition fuel to move us from a world of hydrocarbons to a world of lower-carbon energy sources.”
Ben Nolan, Managing Director, Stifel Financial
Benjamin Nolan, CFA, is a Managing Director in the Transportation sector, covering Shipping and Energy Infrastructure including LNG shipping at Stifel Financial (NYSE: SF).
“…at the moment, everybody wants LNG.
And the problem is that these export projects take many years to develop and produce. So you can’t just decide that you want more.
It won’t happen overnight.
The good news is that there are a number of projects that are being constructed now.
In fact, one in the U.S. in Louisiana just came on stream and is shipping its first cargo as we speak.
But again, it’s going to be a slow growth process for incremental LNG. So I think, as we look out today, prices are high.
It doesn’t seem as though there’s any real reason that they should be falling back, at least anywhere in the next year or two.”
The process of converting natural gas to LNG is capital intensive:
“Taking that natural gas, condensing it down to a size that makes economic sense to transport it when you refrigerate it and get it cold enough to be a liquid — it condenses down to 1/600th of its size.
And then you can move it and power the world.
The challenge is, it’s really expensive to get something negative 260 degrees. So that’s a challenge.
Again, it takes some time.
It’s pretty expensive to do. But if you’re doing it in scale, then there’s both the resource and the demand.
So LNG is, you might argue, a sort of an old energy, not perfectly clean source of fuel, but it is cleaner, and I think almost definitively is very much still a growth business.”
Mr. Nolan also likes Chart Industries (NASDAQ:GTLS):
“I also think that some of the people who produce the equipment that is used for LNG have some nice tailwinds behind them.
The one that I would call out there is Chart Industries (NASDAQ:GTLS), that makes the equipment that liquefies it, that turns it from a liquid back into a gas, that puts the tanks that would go on trucks on trucks.
And so I think as the volume increases and it’s produced and consumed and everything else, there are the sort of picks-and-shovels type players that would really stand to benefit. Chart is the one I would call out there.”
Sunil K. Siball, Managing Director and Senior Energy Infrastructure/Utilities Analyst, Seaport Global Securities LLC.
Sunil K. Sibal is a Managing Director and Senior Energy Infrastructure/Utilities Analyst at Seaport Global Securities LLC.
He has more than 25 years of progressive international experience in the energy sector, most recently at Seaport Global, which he joined in 2014 to cover and build out the firm’s MLP/midstream infrastructure research.
“…One name I want to highlight is Williams (NYSE:WMB).
They operate and manage a set of infrastructure assets that primarily facilitate the movement of natural gas from wellhead to end users, whether those end users are electricity generation plants in the U.S. or LNG liquefaction plants, which basically export this gas to customers in Europe as well as Asia.
So Williams will continue to play a very pivotal role during this energy transition time, especially as the U.S. production sets to a new norm.
The way WMB is participating with this clean energy transition is they’re reducing their own carbon footprint by increasingly relying on renewable sources of power for their own usage.
So they’ve launched an initiative to use solar power for electricity which basically feeds their compressor machines, etc.
So those have been some of the steps they are taking.
They are also part of a hydrogen initiative, which is one of the cleanest energy sources.
So they’re part of a group of companies that is looking at making hydrogen a more significant part of the energy mix. So I do like Williams in that regard.”
Get all the LNG and Natural Gas stock picks from James West, Benjamin Nolan and Sunil K. Sibal by reading their entire interviews in the Oil and Natural Gas Downstream and Midstream Report, exclusively in the Wall Street Transcript.
Gabriele Sorbara, Managing Director & Senior Equity Analyst, Siebert Williams Shank & Co.
In this extensive 3,319 word interview, exclusive to the Wall Street Transcript, Gabriele Sobrara details his top picks among oil and gas production companies and recommends many dividend leaders for investors.
Gabriele Sorbara is a Managing Director & Senior Equity Analyst at Siebert Williams Shank & Co., LLC.
Mr. Sorbara has more than 15 years of research experience covering the oil and gas E&P sector.
He joined The Williams Capital Group in July 2016, which merged with Siebert Cisneros Shank in November 2019, creating Siebert Williams Shank & Co. LLC (SWS).
Prior to joining the firm, he covered the E&P sector at Topeka Capital Markets, Imperial Capital LLC and Caris & Company, as well as over six years at KeyBanc Capital Markets. He received his Bachelor of Business Administration from Hofstra University.
The current situation for the potential dividend leaders has its origins in environmental protections and the last oil and gas production downturn.
“Lenders haven’t been lending money to the fossil fuel companies like they were in the heyday.
Many banks have put restrictions in place to achieve a more ESG-friendly rating. But E&Ps do not need to borrow like they once did.
The balance sheets of these key companies are completely different than they were two to three years ago.
Again, leverage is superbly low. A lot of them are approaching net zero debt and will go into net negative at current commodity price levels.
They are returning massive amounts of cash back to shareholders.
When I look at total capital returns for many of the companies on my list — I cover a lot of the higher-quality names — you are seeing many double-digit capital return profiles.
So what I mean is, dividends plus buybacks divided by enterprise value, with some of these companies reaching 10%, 12% for best-in-class type returns compared to the broader market.
Obviously, these companies are cyclical and they are depleting assets.
So they have to be acquisitive down the road, find new resource plays, and we’ve seen a lot less work being done on the exploration side.
For international projects, which we haven’t talked about, the lead time is years. So those big projects that the majors are doing, those take multiple years before you get that first production…
Over the past month, WTI oil prices have increased over 20%, so E&P margins should continue to improve and translate into higher estimates and stock prices.
Investors will chase oil companies because they are best-known for a hedge against inflation.
While the E&Ps have underperformed oil prices, the fundamentals for the E&P sector are very strong. When the dislocation in the market smooths out, I think people will jump into the E&P sector first and you will see catch-up and outperformance from this group supported by the higher commodity prices.
The sector should gain some strength and stability as the long-only investors increase exposure to the sector.”
Dividend leaders are the sweet spot for oil and gas production investors.
“Investors’ sentiment has been pretty low; I mean again it’s really the hedge funds trafficking in the sector and you can see it with the volatility around earnings periods.
And it’s just on that regulatory side that’s shifting banks away from the sector.
It’s the public demanding certain things on the ESG front. It’s the banks taking on these ESG efforts and that’s really creating the negative sentiment around E&Ps.
I think when people really dig into E&Ps and if they understood oil and gas, they would understand that E&Ps actually do the right thing.
They have reduced GHG and methane intensity; the larger E&Ps are very responsible producers.
A lot are talking about certified responsibly sourced natural gas, responsibly sourced oil.
When you look at some of these renewable companies, people just don’t understand the amount of resources that are required to build a lot of these technologies and facilities that have a life of maybe 20 years and then end up in a landfill somewhere.
For example, these are heavily dependent on rare earths mined and processed in environmentally harmful ways in China.
And these are critical to build expensive electric cars that run on electricity powered by coal and natural gas. Not to mention the challenges in the recycling of the lithium batteries today.
While there are a lot of things going on that people don’t understand or just choose to ignore, I feel like they are starting to get a grasp of it slowly and we are beginning to see a re-rating and a relative rotation to traditional energy companies.
But long-only investors have not made a full turn yet.
The weighting of the S&P is just very low. If you look back 15 years ago when I started, the benchmark weighting to energy in the S&P 500 was at 16% and we are at 3.50% today. So there is a lot of room here to make money and for money to rotate into the sector.
And again, as more of these energy shocks occur around the world, people will realize the value of fossil fuels and how they are reliable and efficient and how they can be produced in a responsible manner.
The energy transition will slowly occur over the next few decades and fossil fuels will be integral to the transition…
Oil and natural gas make the world go round. These products are very important in everyday life. It’s just underappreciated and hated for the wrong reasons.
E&Ps are doing a better job checking off the ESG metrics than they have historically and they aren’t getting credit for it.”
Some of the top dividend leaders are large cap oil and gas producers.
“I think the way you value a company is on free cash flow and the amount of return to shareholders and these are some of the best returns that you see in the entire S&P with dividend yields 8%, 9%, 10% for some companies. I have a dividend yield on Coterra Energy (NYSE:CTRA), 9.8% for 2022; Devon Energy (NYSE:DVN), 6.9% in 2022; Diamondback Energy (NASDAQ:FANG), 5.2%; EOG Resources (NYSE:EOG), 6.4%. And these companies still will have a lot of cash remaining to put on the balance sheet and they can use that for exploration, M&A, or to further reduce debt, but these leverage metrics are approaching zero net debt for many.”
Get all the details on these dividend leaders and many other oil and gas production company stock recommendations from Gabriele Sobrara by reading the entire 3,319 word interview, exclusive to the Wall Street Transcript.
Gabriele Sorbara, Managing Director & Senior Equity Analyst
Siebert Williams Shank & Co., LLC
Randall Neely, CEO, TransGlobe Energy (TGA)
Randall C. Neely, CA, CFA, ICD.D, was appointed President and Chief Executive Officer of TransGlobe Energy Corporation (NASDAQ:TGA) in January 2019 and to the board of directors in May 2018.
He was previously appointed as President in January 2018 and Vice President, Finance and Chief Financial Officer in May 2012.
Mr. Neely has 25 years of experience in executive and financial roles, including Chief Financial Officer of Zodiac Exploration, Pearl (Blackpearl) Exploration & Production and Trident Exploration.
Prior to working directly in the oil and gas industry, Mr. Neely spent three and a half years in investment banking with TD Securities and eight years with KPMG LLP.
Mr. Neely holds both the Chartered Accountant and Chartered Financial Analyst designations and has completed his ICD.D.
In his exclusive 3,627 word interview, exclusive to the Wall Street Transcript, Randall Neely explains how a Canadian company produces oil in Egypt.
“TransGlobe Energy (NASDAQ:TGA) is a small-cap or a micro-cap oil and gas company.
We are primarily a producer, although we do some exploration.
We produce between 12,000 and 13,000 barrels of oil equivalent, or BOE — a measure of equivalent energy to a barrel of oil — per day.
In Egypt we produce, call it about 10,000 barrels of heavy oil per day, and in Canada, plus or minus around 3,000 BOE a day. We produce light oil, natural gas liquids, and natural gas in Canada…
Our success in this area has been what we’re known for, which is applying what I’ll call technology, but really is just oilfield best-practices — western oilfield practices — in a new area. In Egypt, for example, the application of water flooding.
When you produce oil, you typically produce water and sometimes a lot more water than oil. Usually, you take that produced water and you dispose of it, typically back down hole or you let it evaporate, but in some sort of environmentally sensitive way you deal with the water.
What we do with the water is reinject it so we actually push it back into the ground.
If you push that water back in the ground, it produces more oil. That application of water flooding has been used for a long time in North America, but in the Middle East, it wasn’t typically used.
Then you have pumping technology — the different types of pumps you would use.
We use progressive cavity pumps or PCP pumps, a pump that was developed in Western Canada probably 30 years ago. We found it to be very applicable to the type of oil development we have in Egypt.
You’re also looking at other things that you might do with drilling technologies that we use in Canada quite successfully, like horizontal drilling and multistage completions.
That’s an approach that isn’t used a whole lot in Egypt, because they’re looking mostly at conventional reservoirs — easier-to-produce reservoirs rather than the harder, denser, unconventional rock that takes more persuasion to produce.
Horizontal drilling opens up more pore space across the rock formation. Then you might apply hydraulic fracturing so you can crack the rock to get more oil out of it.”
Exploiting global oil resources is a lengthy detailed process.
“In Egypt, you work through what’s called production-sharing contracts.
You bid to acquire them in bid rounds or an auction from the government. If you win the bid, you have an agreement between yourself and the government to produce the oil and for the sharing of that oil.
We’ve had contracts in the country for quite a few years. These contracts were aged and not really appropriate contracts for the type of development we had because of the age and costs associated with these fields.
We worked with the government for several years to restructure them and to consolidate them so that they would be more efficient so that we could continue to try to squeeze out more oil from these existing reservoirs.
That deal was approved by the board of the Egyptian General Petroleum Corporation in December 2020.
Over the course of 2021, it made its way ultimately to the Parliament of Egypt and was voted on, because each one of these production-sharing contracts becomes a law. That was approved in late 2021.
In December 2021, we announced that we had the approval of the Egyptian government for the ratification of this agreement.
That’s a huge step for TransGlobe [Energy] (NASDAQ:TGA).
It really resets the bar for us in terms of the contracts, and for the profitability and the investability of these contracts.
We’ve always felt there was a lot of opportunity left there but we would only be able to pursue it if we had the right terms that would make it profitable for us and worthwhile attempting.
Not only fiscally, but also we needed to have time, we needed to have additional years.
So this agreement extended this contract for an additional 15 years plus the option to extend it another five years after that, so in total another 20 years to exploit the resources in the ground.
It’s a big turnaround for us in Egypt.
In Canada, we’ve got a nice project there, which we call South Harmattan. We found this new area in late 2019 and released the information on it in early 2020 right into the pandemic and no one really paid any attention to it.
But we came back and drilled three additional wells in the summer of 2021, completed those wells in the fall, brought them on production and they’ve come on really, really well.
We are quite excited about the asset in Canada and what it could potentially become…
I would say our entity is one where we’re focused on cash flow, we’re focused on development; we do very little exploration.
You’re not going to see the company go from 12,000 or 13,000 barrels a day to 20,000 or 30,000 or 40,000 barrels a day, because of some discovery that you were going to make.
We’re really just talking about trying to hit singles and get on base, and make money.
We call it blue-collar oil and gas. It’s not very flashy, but we’re going to make a lot of money.”
Creating value in the deserts of Egypt is not an easy task for TransGlobe Energy (NASDAQ:TGA) and Randall Neely. Read the complete detail only in the 3,627 word interview, exclusive to the Wall Street Transcript.
Randall C. Neely, President & CEO
email: investor.relations@trans-globe.com
Bobby Riley, CEO, Riley Exploration Permian (REPX)
Philip Riley, CFO, Riley Exploration Permian (REPX)
Bobby D. Riley was appointed as the Chairman of Riley Exploration Permian, Inc.’s (REPX) board of managers, President and Chief Executive Officer in June 2016.
Mr. Riley also served as the Chief Executive Officer of REG from when it was founded in 2012 to May 1, 2018.
Mr. Riley began his oil and gas career with Cameron Iron Works in Houston, Texas, in 1974.
Philip Riley was appointed as Exploration Permian, Inc.’s Chief Financial Officer on September 1, 2021.
Previously, he served as the company’s Executive Vice President – Strategy beginning in March 2021. Mr. Riley has more than 20 years of experience across energy and other industries as an executive officer, investor, and strategic advisor.
In this 2,426 word interview in the Wall Street Transcript, these two leaders of Riley Exploration Permian (REPX) detail the investment profile for their company.
“Our company, Riley Exploration, is an oil and gas exploration and production company.
It’s focused in the Permian Basin, specifically on and around the northwest shelf. We are a conventional reservoir-based company.
In other words, we’re not involved in unconventional shale production.
We produce oil, primarily from the San Andres formation, which is a conventional reservoir. This particular reservoir is in Yoakum County, Texas.
We have approximately 25,000 net acres, contiguous to the large Wasson Field, which is operated by some of the majors like Exxon, OXY, Apache, along with a few other independents.
This field is one of the largest conventional fields in the state of Texas that’s been producing since the 1920s. It’s undergone waterflood and subsequently CO2 enhanced recovery. It has recovered approximately 2.3 billion barrels of oil since it started production and is still very active today. We are a direct offset to this field in the same reservoir…
All of our crude is sold through a pipeline system. We don’t truck any of our barrels to market. It all goes through a gathering system, and it has outlets to three specific markets in the Permian Basin and access also to the Gulf Coast.”
The company operates in a disciplined manner to provide consistent divident cash flow to investors.
“…If you look at your total production curve, the sum of all of the wells, basically, because it’s a flatter curve, it takes fewer new wells on a yearly basis to hold that production flat or to even create a slight growth, and it’s well within our cash flow.
And we have a specific financial model where we try to allocate about 65% to 70% of our cash flow to drilling and completion to maintain and grow the “wedge,” roughly 20% of our cash flow to dividend distributions and the rest to slight pay down on what existing debt we do have.
But that PDP wedge basically, year over year, it’s growing with minimal dollar investments.
So I guess it’s been said that in the unconventional world, you’re on a treadmill trying to drill wells fast enough to stay ahead of the rapid decline. So we’re contrary to that. In other words, with the production being flat, it’s easy to grow production with minimal dollars.”
The location in the Permian Basin has significant implications for this production company.
“The Permian Basin, primarily over the last decade, has been developing unconventional shale resources, again, that have a very significant decline curve.
From the first day of production through the first couple of years, you might see 80%, 85%, 90% decline compared to our model; we’re in a conventional reservoir which has a much, much less decline and a much flatter type curve.
When activity stops in the unconventional world, production drops significantly because you’re not drilling fast enough to offset production.
In our model, we’re not an unconventional player but we’re a conventional player.
The production does not fall as fast. And as we alluded to earlier, it takes less capital to hold the production flat or slightly grow production.
Because of the inventory of wells that we have left to drill on our footprint and our disciplined capital allocation from our company, we will continue to grow year over year and with investing well within our cash flow.
That’s different from what the rest of the industry looks like without significant capital spending…
at the end of our fiscal year 2021, we had 72 million barrels of equivalent of proved reserves. For that year, we produced 3.1 million.
And so, that corresponds to over a 22-year life. That’s a ratio R over P — reserves over production — almost a 23-year reserve life.”
These two experienced oil industry executives look at stability into the future as their main priority.
“…We’ve been a conservative developing company that doesn’t get ahead of itself by taking on excessive amounts of leverage.
So our philosophy in the past has always been to minimize leverage, maximize our opportunities by living within cash flow.
We established a dividend payment.
It’s very important to the philosophy and to this company to maintain and grow that dividend going forward. I think it right now represents something like a 5% yield, based upon our current share price. But I think that we’re going to be fairly predictable about what we spend and how our growth looks in the future.”
Get the complete detail on the investor friendly Riley Exploration Permian (REPX) by reading the entire 2,426 word interview, exclusively in the Wall Street Transcript.
Bobby D. Riley, Chairman, President & CEO
Philip Riley, CFO
www.rileypermian.com
email: ir@rileypermian.com
Phil Skolnick, Managing Director, Equity Research, Eight Capital.
Phil Skolnick is Managing Director, Equity Research, and Senior Oil & Gas Analyst at Canada’s Eight Capital.
He formerly was Managing Director and head of global energy research at Canaccord Genuity.
He received an MBA from Texas Christian University. He also received an economics degree from Bethany College.
In this 2,430 word interview, exclusively in the Wall Street Transcript, Mr. Skolnick emphasizes his research on the smaller independent exploration and production companies in Canada as a sweet spot for investors in 2022.
“The COVID pandemic caused the whole industry in 2020 to basically go into survival mode.
They had to cut back dramatically on capex spending, not just on the exploration side or growth side, but in some cases even on the maintenance capex side. And they had to figure out ways to reduce their breakeven costs.
And so what we’ve been seeing as the consequences of that on the supply side — particularly on the U.S. oil production side — production is down roughly 1.5 million barrels a day still today from the peak of the pre-pandemic levels.
Activity level still remains somewhat low. And now with supply chain issues, we’re seeing cost inflation happening as well.
And so, because of all this, we’ve been bullish on oil prices.
Back in probably June or July of 2021, we made a call that oil is headed into the $90 range. And it hasn’t hit that point yet, but it’s been very close here of late. And we still do see that happening. We can see, like many others have been saying, $100 at times as well.
The companies have been focusing on returns to shareholders for the most part.
What that means is that they’re trying to maximize free cash flow generation. And rather than putting all that free cash flow back into the drill bit, they’re returning it to shareholders in the form of dividends and/or share buybacks.
Because of that, we’re seeing these companies, for the first time since I’ve been covering the space, since 1997, where you’ve had free cash flows that in some cases are as high as 50% on strip pricing.”
This leads Phil Skolnick to direct his investors into specific smaller-cap oil producers.
“The one thing generally we’ve been recommending since late last year, and we reiterated, is that the market is rewarding the smaller companies that are able to actually grow because they don’t impact the supply picture.
If they can do it on a positive debt-adjusted basis, that means increased value to equity holders.
We’ve been favoring the smaller-cap companies and the ones that screen the best on those metrics for us are InPlay (OTCMKTS:IPOOF), Spartan Delta (OTCMKTS:DALXF), Gran Tierra (NYSEAMERICAN:GTE), PetroTal (OTCMKTS:PTALF), and Tamarack Valley (OTCMKTS:TNEYF).”
These plays hit the investment benchmark for Phil Skolnick:
“One measurement that we’ve been watching here since October of 2021 is the free cash flow yield plus debt-adjusted production per share growth.
And InPlay, Gran Tierra, PetroTal, and Tamarack Valley show probably the best on those metrics and what we call the combination of adjusted free cash flow and adjusted production per share growth.
We call it debt-adjusted total return, because this is all about returns to equity holders.
PetroTal has over 200% 2022 estimated total debt-adjusted return and Inplay has about 200%.
And that dwarfs the other companies that are anywhere from 10% to 100%. Gran Tierra is about 50% and Tamarack Valley is well over 50% on a debt-adjusted total return basis.
The ones that really stand out the most though of those names that we are highlighting or favoring are Inplay, PetroTal, and Spartan Delta — these companies are trading at two times or less EV-to-debt-adjusted cash flows on this year at strip pricing.
So not only are they showing tremendous debt-adjusted total return potential, but they’re trading at basically bargain valuations that we have not seen in this space.”
The imminent expansion of the Alberta to British Columbia pipeline will bring a significantly positive development to the oil producers of Canada:
“The two pipelines, the big ones.
You have the TMX, which is the Trans Mountain expansion. And that’s almost 600 thousand barrels a day of new capacity that’s expected to come online, possibly as early as sometime next year.
The key about Trans Mountain expansion is that it will give you the gateway to Asia. And with Asia, you’ll get premium pricing for Canadian oil, especially for the heavy oil.
And so, we could see at times where Canadian heavy oil could trade at a premium to Brent pricing, because it is in such high demand.
In Asia, with the petrochemical build out — especially China wants to be the dominant player in the pet-chem business as well.
Increasing pet-chem demand yields increased demand for heavy oil. The pandemic slowed things on that growth a little bit, but as we’re coming out of the pandemic, you’re going to see that demand for heavy oil continue to rise…
The thing about the U.S. is there’s no new refineries being built.
There’s nothing going on in terms of increased demand. But what is happening is that as you have increased demand from Asia, and when Trans Mountain expansion comes online, that’s going to be an even further headwind for the U.S., particularly in the Gulf Coast and the Midwest markets, because those are heavy oil consumers that do rely on Canadian heavy oil as feedstock.
And so if they’re going to have to start fighting more and more for those barrels against Asia, that’s just going to be further headwinds on refining margins in those two regions.
In terms of the whole energy transition, the move for carbon emissions reduction, it is an impediment to growth.
It’s not only just the policies, but you’re seeing the shareholders as well, where activism is going on in the space and getting the majors to decarbonize themselves.
That just means less spending on upstream.
What that does is to put further downward pressure on supply, which then puts further upward pressure on oil prices.
Now in Canada, they’re looking to work with the industry in terms of the whole carbon sequestration and we’re still waiting for some agreement to come out between the government and the oil producers, the oil sands producers.”
Get the full detail and all recommendations from Phil Skolnick by reading the entire 2,430 word interview, exclusively in the Wall Street Transcript.
Tom Deitrich, President and CEO of Itron Inc. (NASDAQ: ITRI)
Tom Deitrich was appointed president and chief executive officer and named to Itron Inc.’s board of directors on Aug. 6, 2019.
He joined Itron in 2015 as executive vice president and COO and has played a major role in shaping the company’s strategy to partner with cities and utilities to deliver industrial IoT solutions.
Mr. Deitrich has more than 25 years of experience in global operations at leading technology firms and has held numerous executive management positions where he led business-level strategies that transformed and significantly improved business results.
He has extensive experience in product management, research and development, supply chain management and business development in several industries, including industrial equipment, telecommunications and semiconductors.
Before joining Itron, Mr. Deitrich was senior vice president and general manager for Digital Networking at Freescale Semiconductor. Prior to Freescale, Mr. Deitrich worked for Flextronics International (NASDAQ: FLEX), Ericsson Mobile Communications (NASDAQ: ERIC) and General Electric Corporation (NYSE: GE).
Itron (NASDAQ:ITRI) provides services to utility networks.
In this 3,388 word interview, the CEO of Itron (NASDAQ:ITRI) Tom Deitrich details his company’s prospects and strategy:
“We go to market in three segments: Devices, Networks, and Outcomes. So a device is a measuring type of device, so a meter or a sensor, and it really makes measurements to provide data. So how much electricity are you using, how many gallons of water have you used, is an example.
Then the network takes that data, that measurement, and communicates it robustly and securely back for processing. And the processing could be as simple as what’s your monthly bill or it could be detecting all of these other things that I explained in the distributed intelligence world.
And outcomes really is using all of that data that gets collected to make intelligent business decisions.
So it could be, how much was Constance’s electricity bill? It could be, hey, you’ve got a leaky pipe in your neighborhood and water is being wasted, or it could be smart city applications to automate streetlights. It could be crowd noise.
Where is an empty parking meter? Where are assets being used incorrectly? Where is an asset or air quality monitoring?
You can hook up any kind of sensor to this and be able to process that data.
So that’s three ways that we support our customers — the device to make the measurement, the network to communicate all the information, and then the outcome is all of the processing to make intelligent decisions and use that data for the benefit of the utility as well as the consumer.”
The challenge to utility service management is the sweet spot for Itron (NASDAQ:ITRI) services and products:
“We see our customers are really facing three very large challenges.
There are challenges with infrastructure — the infrastructure is getting old, and it’s starting to break down.
There’s more and more cybersecurity attacks, there’s more and more need for sustainability.
So renewables are being put into the generation side of things. How our utility customers cope with those infrastructure challenges is megatrend one.
Number two is the environmental side of things, and that is things like wildfires and floods and hurricanes.
These things are happening more and more.
Climate disruption is happening and storms happen. And that again is a real challenge too.
How do you keep the lights on and clean water flowing in that kind of an environment?
And the third is the consumer push — the service imbalance.
So, let’s suppose you used a delivery service last night to order your dinner. You knew when you ordered your dinner, when your food was going to arrive and how much it was going to cost, and where in real time you can look at your smartphone and see how quickly the driver was coming to your house.
That level of service you were having with another thing that you interacted with in your life, the delivery service, do you have that same level of service from your utility? Do you have that same insight? So that’s a real challenge for our utility customers to be able to live up to the service expectations that consumers have compared with other things that are going on in their life.
So if you combine infrastructure, environmental and consumer challenges that our customers are up against, how do they overcome these things? How do they make sure they’ve got reliable and resilient services in that kind of environment?
And fortunately, we’ve got technology solutions to be able to overcome those challenges and cope with them.”
The CEO of Itron (NASDAQ:ITRI) Tom Deitrich is pleased with his company’s performance in 2021:
“Utilities generally buy technology and they deploy it and they amortize it over a long period of time.
They live in a regulated environment.
They’ve got utility commissions that govern how they spend money.
But now, because of this new business model, we’re really operating in such a way that there is a recurring revenue stream for Itron.
It’s a different way for the utility to procure technology, and it is allowing them to be more agile as to who knows what will happen next in terms of renewables or electric vehicles or storms and outages.
So it’s more flexible.
And we’re really, really pleased to have been able to A) develop the technology, but B) prove it in the field, in terms of the capability that it provides and the resiliency that it provides, the agility that it provides, but also have that new business model to put it into the field.
So deploying things as a service is different than deploying them as a sold widget or asset.
And it is that combination of new technology, new business model and proven benefits that we were really, really excited to see go from concept and vision to actual business and benefits to customers last year.”
Get the complete detailed interview that explains his company’s strategy and prospects for growth in 2022 in this 3,388 word interview with the CEO of Itron (NASDAQ:ITRI) Tom Deitrich, exclusively in the Wall Street Transcript.
Ryan Connors, Boenning & Scattergood
Ryan Connors has picked A. O. Smith (NYSE:AOS) and Mueller Industries (NYSE:MLI) as two of his stock portfolio buys for 2022.
Ryan Connors rejoined Boenning & Scattergood, Inc. in January of 2015 and serves as Director of Research as well as Senior Analyst covering water and environmental equities.
He was previously with the firm from 2006 to 2010 as Senior Analyst covering the water sector. From 2010 to 2014, Mr. Connors served as Managing Director of Water & Agriculture Research at Janney Montgomery Scott.
His experience also includes buy-side research positions with PNC Advisors, where he covered industrials and basic materials, and ProShare Advisors, where he was responsible for fixed income research and trading.
Mr. Connors has won numerous analyst awards, including being named #2 stock-picker in the machinery sector for 2019 by Reuters/Refinitiv. Mr. Connors earned a bachelor of science degree in finance from Saint Joseph’s University and an MBA from Georgetown University.
He resides in Huntingdon Valley, Pa., with his wife, Kelly, and their three children.
He is a member of the Finance Council at Saint Albert the Great Parish and an on-site volunteer serving the men of Saint John’s Hospice, a homeless shelter in Philadelphia.
Get more top picks and insightful industry sector analysis in this 3,534 word interview, exclusively in the Wall Street Transcript.
“The other issue, somewhat related although different, is pricing power. We’ve obviously had a lot of inflation in raw materials — copper, chemicals, plastics, pretty much everything — and also labor.
These are all seeing inflation.
And so one of the big issues is which companies have the best ability to pass those higher costs through to their customers through price increases. And that’s really important in this environment, because if you can’t pass it through, then the company itself takes a hit on their own margin and profitability.
There’s a great example of a company we like that’s done exceedingly well on pricing power — that’s A. O. Smith (NYSE:AOS). So A. O. Smith manufactures water heaters. And sometimes just plain old common sense dictates who has great pricing power.
When your water heater breaks down, you’re taking a cold shower until you get a new one. And so you don’t tend to call your plumber and say, “Well, can you shop around for five different deals and get back to me in a week and we’ll figure out what’s the best price I can get?”
No, you say, “Get the quickest water heater you can find and please get it over here within an hour. I need hot water.”
And so that industry tends to have the ability to pass through raw material price costs, because consumers don’t want to wait.
They’ll pay whatever price they have to to get that hot water back. And so AOS is a company that’s done exceptionally well and the stock’s done very well in passing through raw materials costs ever since this inflation boom sort of began 12 months ago.”
The award winning equity analyst Ryan Connors has some firm opinions on 2022 investments in the Mueller publicly traded stocks.
“…Our top picks right now — or actually if I had to name our top three — there’s Mueller Industries (NYSE:MLI).
And there are two different Muellers. There’s Water Products, that I mentioned earlier — MWA — but Mueller Industries is MLI. And the beauty of Mueller Industries is that they’re very much under the radar, even though it’s a $3.5 billion company.
We’re the only sell-side Wall Street firm covering the company. So they don’t have a lot of coverage. They don’t do a lot of communications and conference calls, and so forth.
And what that’s done to them is they’ve sat out the ESG bubble a little bit because they don’t really get out there. And they haven’t published an ESG report and communicated with investors on that.
So they’ve traded a p/e multiple of about 10 times earnings. And again, we’ve got companies north of 50.
They’re growing just as well. They’re posting very good return metrics, etc. So we think it’s a great buying opportunity in MLI.
The other one I would mention is Valmont Industries (NYSE:VMI), which is a company doing highway infrastructure products.
It stands to benefit from some of the federal spending that’s come down the pike, which is a lot different from water. Federal spending is really not a good thing for the water industry. It is a good thing for the highway industry. And Valmont plays into that quite nicely.
They’ve also got a good business in irrigation. And farmers are spending more money today.
They’ve come out of a multi-year downturn. And the farm capital spending has been very strong.
And so we expect them to benefit from that as well.”
Ryan Connors says there are additional reasons to invest in A. O. Smith:
“Water utilities, on the other hand, do charge a fee, which is your water bill that you get in the mail. And so, when you pump federal money into that system, you give local politicians an incentive to decrease the billing rates, which is very politically popular at the local level.
But that makes the system less financially sustainable going forward.
Now they’ve got a billing rate that’s below the cost of service. And that can’t sustain that system going forward. So it’s a very counterproductive thing to sort of dump federal money, or even state money, into that system.
So one of the challenges is the federal government is putting money into the water industry to try to recreate the legacy water system nationally. And there are many people who believe that that’s not the way to do things going forward and what should happen is treatment of water should take place in your home at your tap.
In other words, the old way was you would treat the water at a central treatment facility, pump it out through these pipes, and then we turn on our tap to drink.
But now, there’s more and more distrust of that tap water because people don’t know what exactly happens to that water between that treatment plant five miles away and their home. And you read about things like what happened in Flint, Michigan, with lead in the water And people get scared — rightfully so.
So the idea is that there are certain companies, and A. O. Smith is an example, that are very active in the area of what we call in-home water treatment or POU — point of use water treatment — where you install a treatment system under your own sink.
And it doesn’t really matter how the water arrives at your house, because you’re treating it right there at the tap and you’ve got 100% confidence that it’s going to be clean.
So it’s not bottled water. It’s even better because you’re not dealing with the plastic.
You’ve just got a nice treatment system right there at your home.
And there’s cost estimates that say we could outfit the whole country with one of those. They’re only a couple of hundred dollars each. And the government would probably negotiate an even better deal than that.
So why wouldn’t the federal government be incentivizing that type of infrastructure instead of the legacy type central treatment system?
So bottled water, bottled water usage, has actually suffered in the pandemic, simply because people aren’t out as much.
A lot of bottled water gets purchased in an airport or somewhere where it’s a pure convenience.
When people are home more, and working from home, this sort of in-home treatment where you’re treating the water and able to drink it straight out of the tap becomes more preferable and cheaper than actual bottled water.
So related to that, we have a “buy” rating on A. O. Smith.”
Get the complete detail by reading the entire 3,534 word interview with Ryan Connors, exclusively in the Wall Street Transcript.
Ryan Connors, Director of Research & Senior Analyst
Boenning & Scattergood, Inc.
www.boenninginc.com
email: rconnors@boenninginc.com
Christophe Gaussin, CEO, the Gaussin Group
Gary Patterson, EVP North American Operations, Gaussin Group
Christophe Gaussin was appointed Chief Executive Officer of the Gaussin Group, the hydrogen powered vehicle manufacturer, in 1994.
Trained in design office techniques and all processes of product manufacturing and having worked in the company since 1992, Mr. Gaussin has an excellent vision of products and sectors.
Holder of a management control diploma from the Institut de Management Control (ICG-1998) and an Executive MBA from Concordia University in Montreal (2005), he was also President of the Haute Saône Chamber of Commerce from 1997 to 2001.
Gary Patterson is the Executive Vice President of North American Operations for Gaussin.
He joined the hydrogen powered vehicle company in September 2020 with more than 25 years of B2B information technology experience.
An expert in change management, he knows how to use innovative solutions based on the exploitation of data.
Prior to joining Gaussin, Mr. Patterson previously held the position of Director of Operations at Bestmile, a Swiss supplier of a fleet management platform for mobility players aiming to deploy, manage and optimize vehicle fleets, autonomous or not.
At Bestmile, Mr. Patterson was responsible for strategic partnerships as well as customer operations, including deployment and support operations.
Prior to that he served as Vice President of Technology at Dell Technologies [NASDAQ: DELL], overseeing cloud management infrastructure and software delivery.
In this 3,674 word interview, these two senior executives from Gaussin Group explain the development of hydrogen powered vehicles and how the cutting edge in this carbon killing technological innovation is progressing.
“It’s our vision to be a game changer.
We had an opportunity 10 years ago to create this portfolio of products for ports, logistics centers, airports and smart cities. So it was really a transportation focus which started with the off-road segment, and now we have on-road focus, based on a new Road Truck Skateboard.
Also, I’m speaking with you from Riyadh in Saudi Arabia, where we just completed the 2022 Dakar Rally. We participated in the experimental category, and we were the first one in the history of the race with a hydrogen truck, zero emissions.
It is the first hydrogen racing truck ever built and we won in this category.
We were alone by the way, and we had zero emissions, zero noise in Saudi Arabia during two weeks of racing, and now there is a special event with His Highness Salman bin Abdulaziz Al Saud, the King of Saudi Arabia, who wanted to see the truck.
It’s really something, and it’s very interesting to understand. Every 100 kilometers, we produce something like 100 liters of water per hour with this truck because of the phenomenon of hydrogen. You split the hydrogen with a fuel cell, and you produce electricity for the vehicle and water.
So it’s really clean, it’s zero emissions, and silent — which is very important for the driver, because you don’t have a gearbox anymore. The noise of a racing truck is normally very tiresome.”
The hydrogen powered vehicle is a highly specialized propulsion system that the Gaussin Group has mastered:
“You can really compare it to your car. It’s a tank and instead of petrol that you have in the tank, you have hydrogen. And so when you need more autonomy, you need, for example, to do this race, the Dakar, it’s impossible to do with batteries alone, because you will have a very short autonomy.
And so here we are using the hydrogen like a range extender or like a tank. And of course, the more storage capacity you have, the more autonomy you have with hydrogen.
Next, you produce electricity thanks to fuel cells, and you always need a battery because you need to store electricity. And electric motors for the torque that we must have due to the weight — you need a lot of power when you want to start.
And so, you need a battery.
In fact, in all applications that a battery is used for, hydrogen can also be applied. People want to make a comparison between batteries and hydrogen, but in fact, you always need a battery, but the battery will be smaller, and you will add the hydrogen and the fuel cell…”
The question of how the hydrogen propulsion system works is addressed in the interview with the two Gaussin Group executives:
“TWST: How is the hydrogen different from battery, and is one actually better?
Mr. Patterson: In effect, think of the hydrogen as allowing you to charge the battery while you’re moving. So today, you have hybrid cars that use a petrol generator to charge the battery, but you’re using fossil fuels. With the hydrogen, you’re using a hydrogen generator to charge the batteries.
Mr. Gaussin: Five years ago, batteries were very expensive per kilowatt, though not as productive. And we do believe that now we will see the same cycle with hydrogen, but in this industry — with massification, with volume — the price will decrease dramatically.
But the fuel cell will be smaller, more powerful. It will be the same story of the learning curve thanks to the technology.”
The Gaussin Group is also racing to provide this hydrogen propulsion technology on a global basis:
“We don’t want to hide all these new technologies. We want to share this technology to be able to produce in the U.S. and to integrate local suppliers, step by step.
For example, we have an agreement with Plug Power (NASDAQ: PLUG) in the U.S. to integrate their fuel cell.
We have another agreement with Microvast [NASDAQ: MVST] — it’s a battery manufacturer — and so, we wish to localize and to create an ecosystem, and after that, to offer first-class maintenance services. And the goal after that is to create transport-as-a-service.
It’s really for the final customer, but he will be able to pay per kilometer or per hour, and it will be very simple for him with an App. It’s our business model.”
Get the complete detail on the Gaussin Group strategic objectives for a hydrogen powered vehicle future and the expectation of return for shareholders, exclusively in the Wall Street Transcript in this 3,674 word interview with Christophe Gaussin, Chief Executive Officer of the Gaussin Group and Gary Patterson, the Executive Vice President of North American Operations for Gaussin.
Christophe Gaussin, CEO
Gary Patterson, Executive Vice President for Gaussin North America
Gaussin SA
11 rue du 47ième RA
Héricourt France
+33 3 84 46 13 45
www.gaussin.com
email: info@gaussin.com
John Ewart, Investment Manager, Aubrey Capital Management
In this 3,821 word interview, John Ewart, an Investment Manager at Aubrey Capital Management details his belief in the emerging markets growth stocks of India, Singapore, China and Indonesia.
Mr. Ewart is a Co-Manager for the Aubrey Global Emerging Markets portfolio and joined Aubrey in 2012. He is an Economics graduate from Strathclyde University and member of the CFA Institute.
Mr. Ewart began his career with Glasgow-based FS Assurance in 1988, and managed European equity portfolios in the U.K. retail and pension fund market.
In 2000 Mr. Ewart joined First State Investments to manage the pan European retail and segregated client portfolios. In 2004 Mr. Ewart moved to Alliance Trust PLC and subsequently managed a U.K. specialist portfolio, before proceeding to manage a Global Equity portfolio, and latterly the Global Emerging Markets portfolio.
“We’re very focused on growth. And when we say growth, we mean cash flow growth.
We look for companies that generate specific metrics, notably a return on equity in excess of 15%, cash flow return on assets of 15%, and ultimately profit growth of 15%. These are not easy parameters to meet.
If you look at the MSCI Emerging Markets Index, that index has struggled to achieve a return on equity of 15% over the last 10 years and has done so very briefly.
We hold excellent businesses with the level of profitability that enables them to reinvest in their expansion and further capitalize on that growth opportunity. So our focus is very much on growth investing.
But the valuation of those stocks in the portfolio is also clearly a key parameter.
In terms of regions, our biggest exposure at the moment is to India, where we have over 40% of the portfolio. You may think that’s a high figure, but we’re very much in the camp of being active managers.
We have our own analysis and that guides our stock positions.
There are many stocks within the index that we do not buy for our clients.
Many are heavily influenced and some are dominated by various governments in different parts of the world. Some carry risk in areas where there are industries in decline, delivering poor returns, or having limited growth prospects.
And we think that consumer-focused opportunity is, in many ways, the area where we can see the prospect for enterprise and successful business continuing to expand and providing greater areas of opportunity as we go forward.”
India has lagged China in respect to COVID 19 pandemic recovery.
“By contrast, what was seen in India was a bit chaotic.
And India is now considered to be going through this third wave of COVID. The first wave really impacted the poorer segments of the society, particularly those that live in urban, dense areas.
When the government basically decided that they were closing the economy, a lot of these people had to leave because they didn’t have access to employment, therefore they couldn’t afford to live in the urban areas they were in.
That was a humanitarian disaster, because you had individuals trying to walk literally hundreds of miles back to their villages. India learned a lot — learned a hard lesson from that.
The second wave of COVID in India really affected more of the middle class. And what you found was a lot of people confined themselves to their homes for safety reasons.
You also then found the adoption of various behaviors, and sectors such as food delivery being very popular. Again, we’ve seen that in countries such as China during the whole COVID experience at the outset.
We start to see this repeat of consumer behavior in different countries when similar situations arise. And even when individuals have the option of being allowed to go out and visit restaurants post the COVID waves that we’ve had, there is still a reluctance, there is still a hesitation.
So the adoption of food delivery has actually become much more almost mainstream in people’s behaviors. And certainly, there’s been a lot of evidence in China and in India that this sort of change in consumer behavior is here to stay. Not just a temporary phenomenon because of COVID.”
An emerging market faces challenges idiosyncratic to it’s own specific government and region:
“…If you consider the prospects in countries such as South Africa, Mexico or Turkey, it’s very difficult for the consumer to feel optimistic, because the outlook politically remains challenged.
The outlook for economic growth has been very difficult for a number of years.
And quite simply, if the consumer doesn’t feel optimistic about their employment prospects, their income growth, then they will not spend to the same extent. So, whilst we’re broadly optimistic, it’s very country specific and is very focused on the consumer itself.
One of the biggest challenges at the moment is the negative sentiment toward China as a country, as an investment destination — less because of the outlook for the consumer, which we continue to think of as optimistic with economic growth, inflation under control, increases in wages and salaries for those that are employed in China — but because the government really has made a virtue of its Common Prosperity program.
We think a lot of corporates are wary of not conforming with that and have to be seen to conform with those government aspirations. Consequently, we’re seeing a lot more expenditure on areas which are being encouraged by the government.
But many companies are of the view that they have to be seen to be the good corporate citizens, otherwise they possibly incur the wrath or the disappointment of the government. That type of government intervention is not always welcome.
And despite the fact we can understand the greater aims of the government in China, we think there are other ways to achieve those aims, rather than squeezing the corporate sector.
Interestingly, there has been recent evidence of local government in China attempting to squeeze payments from small, local entrepreneurs to offset their reduced income from land sales, and this has resulted in push back, which is encouraging.”
The stock markets in emerging markets, especially growth stocks, offer a stock picker’s advantage over index investing.
“I would highlight is that when you look at emerging markets over the last 10 years, the actual growth in the index, the MSCI Emerging Markets Index, has not been that spectacular.
And for a lot of global investors who sit in America, they look at the returns they’ve received from the U.S. indices and think, “Why should we bother with these emerging markets?”
Although there’s the prospect of political strife in China, maybe the prospect of currency concerns in Turkey, the point that we would make is that there are strong structural drivers which present investors an opportunity to invest in good businesses, genuinely good businesses.
And they have been established and run by successful entrepreneurs. And they’re providing good services that a huge population wishes to participate in.
So the strategy that we have adopted, and that we have ingrained within our philosophy, has resulted in very significant returns, comfortably ahead of the returns from the index.
These are significant returns which have provided a benefit to our clients, including our clients in the U.S. who have recognized the longer-term structural growth opportunities that we discuss with them.
So please look beyond the index and look at the actual active fund managers who are identifying these themes, investing in good companies and delivering alpha.”
Get the specific stock suggestions and more detailed analysis be reading the entire 3,821 word interview with John Ewart, Investment Manager at Aubrey Capital Management, exclusively in the Wall Street Transcript.
John Ewart, Investment Manager
Aubrey Capital Management
www.aubreycm.co.uk
email: clientservices@aubreycm.co.uk
David Marcus, Evermore Global Advisors
David Marcus is Co-Founder, Chief Executive Officer and Chief Investment Officer of Evermore Global Advisors, LLC.
He co-founded the firm in 2009. Mr. Marcus is portfolio manager of the Evermore Global Value Fund and the separate account portfolios. Beginning his career in 1988 at Mutual Series Fund, he was mentored by value investor Michael Price.
Mr. Marcus managed the Mutual European Fund and co-managed the Mutual Shares and Mutual Discovery Funds, representing over $14 billion in assets. He also was director of European investments for Franklin Mutual Advisers, LLC.
In 2000, he founded Marcstone Capital Management, LP, a long/short Europe-focused equity manager, largely funded by Swedish financier Jan Stenbeck.
Mr. Marcus later founded and was Managing Partner of MarCap Investors LP. He graduated from Northeastern University in 1988 with a B.S. degree in business administration and a concentration in finance.
In this extensive 4,892 word interview, exclusively in the Wall Street Transcript, David Marcus reviews the current value investing philosophy of his money management firm and details his top picks for 2022 and beyond especially among European family businesses.
“Our view is always, “OK, it might be undervalued, it might be cheap, but who cares? What’s going to make it less cheap? What’s going to make it go up?” That’s why we look at these catalysts and things that can get the value, I would say, from the stock to the shareholder.
How do you get the value to us as owners of those shares?
And we are fixated on that.
We also have a long-term affinity for companies that are family controlled, or tightly held, where you might have a family or a couple of individuals that control a publicly traded company. And they’re investing for the long term. And we can tag along with them, as they continue to create shareholder value over time. Those can be really good compounders.”
The lifelong investor David Marcus found great investments in the European family businesses no one else was interested in:
“I grew up in a house where my dad and my uncle owned a small stock brokerage firm. It was a two-man show. They were forever talking about stocks. I knew this was the business I wanted to be in.
While I was in college, I did an internship for a mutual fund, and that was run by Michael Price. Michael is a well-known legendary value investor. I was lucky that in 1987, I was an intern answering the phones before, during and after the crash of 1987.
And he invited me to come back after I graduated from college. I went back.
I was really a grunt. I worked on the trading desk for him as an assistant. And I just wanted to get out there and pick stocks.
Everybody in the firm basically just worked for one guy. And what I found was that whenever somebody pitched an idea, if it was in the U.S., Michael had an opinion on it.
But when the only person doing the non-U.S. investing left the firm, I realized that Michael had really not focused as much on the European side or the non-U.S. side. So I said, I’m going to put my effort there, because I thought there was a lower barrier to get airtime with him and pitch an idea.
And what I found was that in the early 1990s, the Nordic region, especially Sweden, was going through a devastating financial crisis.
And what I learned early on was that in a crisis, investors generally go home.
The Americans go back home. If they’re in Europe, they go back to America, the British back to the U.K., the Germans to Germany and so on.
When I went to Sweden, which was the first country I ever visited outside the United States, I had the place to myself as a foreign investor.
I saw nothing but opportunity.
All kinds of companies were restructuring, spinning off assets.
You had all these families that control businesses. I just started coming back every six or seven weeks.
I just immersed myself there. And I found that there were a lot of bargains.
And then I went from Sweden to Denmark, to Finland, to Norway, to France, to Germany.
I saw that there were these families that controlled companies.
I needed to get to know them. I wanted to know what the main shareholders thought. I started calling on all these families.
Many of them had really never talked to investors before. And I just would keep calling until I got a meeting.
And I built this great network of individuals and families that control companies all over Europe. I eventually expanded it into Asia, but I really spent my time mostly in Europe, just because that’s where so much opportunity was.”
“Norway is a great example of a country where they discovered oil but have not completely transformed.
Norway became one of the richest countries on earth.
They have a trillion-plus government-controlled oil fund, which was created from taxes on oil. And over the years, a lot of families became very wealthy servicing the oil and gas industry, be it through oil services, building the rigs and deploying the rigs, the boats, the drills, etc. Now, in many cases, they have repudiated what made them successful.
They’re using that cash and capital to be at the forefront of technology for the tomorrow opportunity — carbon capture, clean hydrogen, offshore wind farms, etc.
It’s interesting you can find companies where you are paying sort of the valuation of the old businesses but getting the tomorrow opportunity.
It’s not just Norway, I’m just using that as a key example. But we’re seeing it across the region.
People historically have said that you don’t have a lot of entrepreneurialism in Europe. That’s BS. France, Germany, U.K., Italy, we’re seeing entrepreneurs and innovators bubbling up everywhere. There’s a vibrant private equity and venture capital market.”
Read the entire, extensive 4,892 word interview with David Marcus of Evermore Global Advisors, exclusively in the Wall Street Transcript and get his top picks and detailed knowledge of best publicly traded opportunities among European family businesses.
