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Thoughts on oil and gas (Oct 2014)

  1. Ethane prices will collapse.  The pricing for natural gas liquids (NGLs) will also probably collapse though I am less sure of that.
  2. There is a very high amount of fraud when it comes to exploration and production (E&P) companies.  This creates opportunities on the short side and makes the long side difficult.
  3. Going forward, midstream will be an attractive place to be for shareholders.

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Contango Ore revisited (October 2014)

Contango Ore recently announced a joint venture with Royal Gold (press release).  Royal Gold will invest $5M initially with an option to increase its ownership in the project.  It looks like I was too optimistic in my assessment of the company.  I thought that the company was ready to advance the deposit to production.  The terms of the joint venture suggest that this isn’t a sure thing.  The partners will likely need some luck to find more ore to make the deposit economic.

Looking back on my analysis of junior miners, I did not do a very good job in spotting deposits that would turn into profitable mines.  Nevertheless I managed to make money by playing the volatility and by being lucky.

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What happens when technology is good enough?

There are some areas in technology that have reached maturity and are at the point of being good enough.  Take JPEG image compression for example.  This old technology is used on websites everywhere to compress images.  There is a newer JPEG2000 format which is technically superior.  However, this superior technology has seen very little adoption on websites.  Internet speeds are so fast that the benefits (webpages loading slightly faster) aren’t important enough for webmasters to switch.

For some shareholders, there may be a disappointing future ahead.  Once the demand for more computing power stops, there is no longer room to create value with newer technology.  Often what happens is that mainstream consumer demand goes away first.  This can devastate the business model of companies developing new technology as it can only be sold on a smaller scale to niche markets.

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(CONN) Conn’s lending practices

(This is not a short writeup where I say what I truly think.  I don’t like doing such writeups because I don’t want to get sued.)

In a nutshell, I think that it is worth taking a deep dive into Conn’s lending practices.  In my opinion, the 10-Ks and 10-Qs seem to ignore some important ‘nuances’ of Conn’s lending practices.

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An investor’s guide to search engine optimization (SEO)

Search engine optimization is about getting a website to rank higher in search engines.  The goal is to increase web traffic without having to pay for ads.

This primer on search engine optimization is relevant to these stocks:

  • RetailMeNot (SALE)
  • Demand Media (DMD)
  • Search engines (GOOG, Yahoo Japan, IACI/Ask.com, MSFT/Bing)
  • Phone book companies (YLO.TO, DXM)
  • Somewhat relevant to online e-commerce companies (AMZN)

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SCTY and solar subsidies

There are subsidies specific to residential solar that aren’t available to other forms of solar.  Essentially, homes without solar subsidize the ones with solar by paying higher electricity rates.  I don’t think that this is sustainable in the long run.  For there to be more residential solar, electricity rates will have to go higher and higher.  (Ironically this improves the economics of subsidized residential solar.)  At some point, I think that voters will ask for lower electricity bills.  Eventually, politicians “ought” to reduce residential solar subsidies.

(The analysis in this post is superficial.  I apologize in advance.)

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