Black Diamond Energy: Spectra Energy Similar To KMI In 2015

September was a bad month all over for the Black Diamond Energy fund. Clint Carlson’s multi-billion Carlson Capital Black Diamond Energy Long/Short fund generated a return of 2.14% for clients net of fees during the second quarter, bringing year-to-date returns to 4.49%. The fund was up 7.7% prior to August but volatility around the OPEC Algiers meeting curbed gains for the year, that’s according to the fund’s quarterly letter, a copy of which has been reviewed by ValueWalk.

Two key short positions moved in the wrong direction, costing 2.01%. One short position was taken over by a peer and another benefited from ‘media hype’ around a natural gas discovery (Carlson believes this to be a transitional anomaly). For the short book as a whole, returns were -2.97% during the month of September. For the year to October 14 however, the short book is up 5.92%.

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After the oil sector bloodbath of early 2016, Carlson’s quarterly letter speculates that fundamentals are beginning to emerge as a factor that is reflective in stock performance once again. Over July and August  momentum and energy beta were the dominant theme, but heading into the fourth quarter Carlson’s analysts expect companies will have to provide 2017 outlooks which should bring the re-emergence of fundamentals as the dominant driver of stock price performance.

Carlson Capital’s Black Diamond Energy Up 2.14% For Quarter

Large-cap E&P producers were the best performers in Carlson’s portfolio for the quarter just gone according to the letter. The fund’s analysts believe restructuring large-cap E&P companies are some “of the most mispriced securities in energy”. Companies such as Anadarko Petroleum (APC), which continues “to trade at some of the cheapest multiples (5.2X 2018 EV/EBITDA at $60 crude) and widest discounts to NAV’s in the energy space, which is interesting given they have some of the best assets in E&P globally.” The letter goes on, “the market has an obsession with select small and mid-cap E&P but is overlooking the value proposition large cap E&P is presenting.”

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Disclosure: The views expressed herein do not constitute research, investment advice or ...

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