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Santo Domingo, December 13, 2022
The health emergency caused by the coronavirus and the subsequent invasion in Ukraine have led the world to a complex economic context marked by inflation and also by changes in industries and their billings. In this sense, in the first part of 2022, Antonio Velardo explains that there was a 35% increase in the oil shares of his company
He explains this situation with the ESG narrative that has constrained supply leading to companies not really being able to spend money on development to increase exploration or CAPEX, having a hard time catching up on supply. He explains that while investors are not they initially wanted to hear about CAPEX for new projects, understanding that companies were meant to be revenue streams that focused on returning capital to shareholders. In this framework, says Antonio Velardo, the supply restriction has been created that will take time to catch up and that is, he maintains, the reason that explains the rise in oil. A future of growth for oil? Answer Antonio Velardo The data mentioned above makes Antonio Velardo think that it would not be a surprise to find oil near historical highs during 2023 and 2024. However, he explains, the strategy continues to be to invest in undervalued oil companies that are capable of generating cash flow and paying off debt. For this reason, what they consider from their company is that investment in oil can continue to be very safe in terms of disadvantages, at the same time that it has a very high upside potential. Along with this, Antonio Velardo says that some small companies Hidden Canadian oil companies are able to trade at a very cheap valuation similar to the multiples found at Russian oil companies. When asked why, he says it’s because the valuation has to take risk into account. However, the geopolitical risk of Russia cannot be considered in the same way as that of Canada, considering that the latter would deserve a higher multiple. Although it is not understood at this moment why market efficiency is not catching up still with the differential, they continue to believe that it will at some point and that it could be soon. Antonio Velardo and how to deal with investments in the short term With the complex scenarios that he is aware of in this regard, the advice that Antonio Velardo gives investors is to see the current picture as a multi-year opportunity. Although it is true that the situation could become more volatile and there could be some setback, especially if OPEC speeds up the entry of barrels to the market, it is also real, says Velardo, that this will be the only opportunity for add the falls. Therefore, Antonio Velardo considers this as the current gold of value investors. It’s about finding stocks that have been under a lot of pressure over the years and going on to sell for 4 to 5 FCF, with no intention of spending money for growth, just the buyback and dividend. This continues to be an opportunity that, according to Velardo, investors should not miss and that they can overweight in the portfolio, being able to think of the current time as something that, in the future, could be seen socially as “investors’ revenge”. .
Contact Contact name: Irene López Castillo Contact description: Irene López Castillo Contact telephone number: 673849560
