TransGlobe Energy (TGL.TO, TGA) and Centamin PLC (CEY.L, CEE.TO) are two publicly-traded companies that have not been able to get their profits out of Egypt. The end game may be awful for shareholders if they cannot get any profits out of the country ever. While I am interested in shorting companies with Egyptian assets, the obvious danger is if the Egyptian government begins to respect foreign capital.
*Disclosure: No position in either TransGlobe or Centamin.
I find that ranking stocks is a useful analytical tool. Ranking stocks against each other helps me be more realistic about how good or how bad a stock is.
I have some extreme and unconventional viewpoints. Many “value investors” would have a list that would be the opposite of mine. Many of the stocks I have shorted have been mentioned on ValueInvestorsClub.com as longs or potential longs. Many of these people are quite intelligent and eloquent. In my opinion, the longs do not understand how they are being bamboozled and misled by stock promoters. I’ve written about this many times on this blog (e.g. “How would a sociopath fleece investors in oil and gas?” and “Beating Wall Street in oil and gas“).
While the independent E&P sector has seen a meltdown in share prices, I don’t see undervaluation. The problem is that many of the companies continue to be run by stock promoters and charlatans (more so in the small caps than the large caps). Until the management teams get better, I don’t think that the independent E&P space will be a good place to look for longs. My prediction is that there will be more pain to come when NGL prices collapse.
Unfortunately, I’ve had a bad start in 2014. My long positions and my short positions are moving against me. I suppose that this is bound to happen because stocks are never perfectly correlated. (If they were perfectly correlated then there would be no point in trying to pick stocks or to profit from short selling.)
While I have a large number of short positions (30+), I have managed to find many stocks (mainly Chinese and solar stocks) that have quickly moved against me.
The bulk of TransGlobe’s operation is in Egypt, where all oil production goes through the Egyptian General Petroleum Corporation (“EGPC”). The problem is that the EGPC has not been paying oil companies on time and owes massive debts. At YE2012 TransGlobe had $221M in accounts receivables (the majority of it is due from the EGPC). At this point, some common sense should kick in. Egypt is not a place where you want to do business. The government will likely keep most of the oil profits… if not all of the profits. Despite the obvious, TransGlobe continues to expand heavily in Egypt.
*Disclosure: No position in TGA. I have no intention of shorting it.
