Potential 275% Upside In This Stock From Contracted Revenue + Book Value Alone

ROI Monthly Jan 2023

Review - January 2023

My take on the most important events of January:

• Offshore drilling takes off as expected!

Readers will be familiar with my thesis surrounding the offshore sector and why it has me so bullish. See the November edition of the ROI monthly here

The representative ETF OIH is up YTD 5.55% with my largest position in the sector RIG up a cool 44.21% YTD!

Impressive start.

• Is the USD losing some of its relative strength?

The DXY has slowed in its previously upwards march on the back of softening FED rhetoric, with the ‘Fed whisperers’ claiming J Powell is hinting at a more gradual yet more prolonged rate hiking cycle. The DXY has dropped c. 1.5% so far this year and it will be interesting to see how close the FED can get to its FFR target of 4.75-5%.

I will be watching for the DXY to drop another c 5% towards its 5 yr 200ma (see below) as that will be my preferred point of significantly increasing capital deployment into EM, particularly Brazilian equities.

Speaking of Brazil and emerging markets, below is a chart of my highest conviction plays in those markets: Ecopetrol: EC, and Petrobras (PBR) compared to the EWZ Brazilian equity ETF. As you see, both have outperformed the ETF YTD with all 3 now poking the heads above the 200ma, which for me, suggests an excellent technical indicator for a strong move to the upside

The SPX has shown surprising strength, up YTD 4.23% at time of writing.

I don’t expect this to last, given the weakening economic fundamentals Vs valuation multiples in the US broadly, with the PE of the SPX at c. 20x.

The counter to this idea would be that a softening FED policy would be buoyant for stocks, however in that case, I’d much prefer to be in emerging market behemoths whose currencies and hence earnings will likely benefit more in that environment with their valuation multiples being much lower.

Ben’s Buys.

What’s Ben Buying This Month?

In this segment I give you my take on a particular stock, including my investment thesis and valuation estimate.

This January I am adding significantly to my exposure in this ultra contrarian investment take.

I believe this company has a strong chance of a 275% upside as it currently trades at less than half its book value and has $2.7 Billion in contracted revenue out to ‘26.

It is my contention that I am buying this company for less than its BV and contracted revenue stream.

Too see my take on this potential multi-bagger, please join the ROI club and I’ll see you on the other side.

All the best.

Benjamin

*Disclaimer: I am not a financial advisor and this is NOT financial advice. The purpose of this publication is merely to document my journey in investing and to share it along with my opinion. Everything shared in this publication is purely my opinion, you should not make any financial decisions based on anything you see me do or hear me say. Please seek the appropriate professional advice before making any financial decisions. *