Frank Holmes-Fossil Fuels Are Under Siege. Is Misinformation to Blame?

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It's becoming more and more difficult to be in the fossil fuel business. On both sides of the Atlantic, lawmakers and unelected bureaucrats are turning up the heat, so to speak, on companies over the issue of climate change.

In the U.S. House of Representatives, Democrats have launched an inquiry into whether oil companies have participated in so-called “climate disinformation.” This week, letters were sent to top executives of Exxon Mobil, BP, Chevron and Royal Dutch Shell seeking records, and hearings are scheduled for next month.

Meanwhile, the Securities and Exchange Commission (SEC) is expected to propose a series of new disclosure requirements all publicly traded companies must make, possibly as soon as year-end, to inform investors about potential climate risks associated with their business.

Smead Capital Management: Energy in the Icahn-ic Green Room

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David Dreman’s book, Contrarian Investment Strategies, was gospel to investors when it was first published in 1979. Investors had been decimated by markets going nowhere over the prior 10 years. Stock investors were ready for something new. Dreman had produced a lot of success as an investor and wanted to share his gospel of contrarian value investing.

The perfect picture of Dreman’s gospel comes from his opening chapter. He refers to the stock market as a casino with a green wing and a red wing. Looking into the green wing, “the atmosphere is unhurried, the blackjack tables are sparsely attended, and every player sits behind a mound of green and black chips.” As he points out, everything is so mundane that “you think you’ve come to the wrong place.” The next thing you notice is the players in the room, “they’re all winning.”

It’s Time To Get Greedy In The Energy Sector, Part Deux

The Felder Report:

The contrarian case for buying energy stocks just keeps getting stronger and stronger. Exxon, after getting booted from the Dow Jones Industrial Average, just experienced its worst 30-day stretch of stock price performance in at least 40 years, according to SentimenTrader.

 And it’s not just this sector flagship; energy stocks now represent the most hated stock market sector of all time according to the firm. To top it all off, The Economist recently proclaimed the death of oil (once again: see 1999 and 2003).

Smead’s Folly Becomes Newsom’s Folly

Smead Capital Management:

We became extremely bearish on energy in 2011. At the time, we saw interest in Seattle for hybrid and electric cars. This convinced us that 10% of the cars on the road nationwide might be hybrid and electric by 2020. In actuality, only 2% of total unit sales in the U.S. were electric vehicles over the last ten years. We also felt back then that the enthusiasm among investors for emerging markets/China was overblown and would cause oil demand forecasts to fall short of expectations.

It turns out we were wrong, because we were too early in our prediction. It wasn’t until 2016, and then more recently with the COVID-19 lockdowns in 2020, that oil prices declined steeply. From the summer of 2014 to the summer of 2019, we benefited from having no participation in the energy sector.