Cliff Remily's Value Investing Congress Presentation: Subsea 7 ~ market folly

Wednesday, September 10, 2014

Cliff Remily's Value Investing Congress Presentation: Subsea 7

We're posting up notes from the 2014 Value Investing Congress in New York. Next up is Cliff Remily of Northwest Priority Capital who presented Subsea 7.

Cliff Remily's Value Investing Congress Presentation

Nice bio: was at PIMCO equities. Traveled a lot "hospitalized on 3 continents", once detained in China.

Think of value as a continuum: must have some of each in the portfolio
Absolute value = the uglies, very deep value, hard to find
Basic value = cyclicals, out of favor but beware of value traps
Value compounders = great businesses but not cheap most of the time
Emerging leader = businesses that might have a lot of optionality that is not recognized by the market, volatile, expensive 

Idea in Basic Value: Subsea 7  

Largest pureplay engineering and construction company in offshore oil and gas: big barriers to entry, big long-term shareholder  Trades cheap to industry

Market segments: deepwater design/build the things under the platforms; maintenance, shallow water pipelines, remote subs

The industry is OK: secular growth, barriers to entry, 2-3 large players, strong balance sheet, mispriced (everyone hates the North Sea; had write-offs in Brazil)

Profitability in line with industry, valuation way under. 

Range $10-$13-$22-$28-$37. Worst case estimate is at $75 brent oil

Q&A: oil estimates Brent at $100 for base case to estimate willingness to spend on capex
Q&A: Transocean business %? Does not know.

Be sure to check out the rest of the Value Investing Congress presentations here.

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