Tags: Lasry | oil | energy | stocks

Hedge Funder Lasry: Oil Price Drop Makes Energy Stocks Attractive

By    |   Friday, 31 October 2014 12:13 PM

The slide in the price of oil in October has created buying opportunities, says hedge fund star Marc Lasry, CEO of Avenue Capital Group and co-owner of the Milwaukee Bucks.

"A number of equities have gotten hit anywhere between 25 to 50 percent, because prices have come in so much on the oil side," he told CNBC. "The equities of these companies are trading pretty cheaply."

U.S. oil prices hit a two-year low this week thanks to sluggish demand and bountiful supply. U.S. oil output has risen to 8.97 million barrels per day, the highest since at least 1983.

"A number of companies are having issues on the energy side. What we try to do is buy that debt at a discount. . . . long term it's [energy] actually very good. But now short term you've actually got the ability to invest and buy that debt anywhere around sort of 60 to 70 cents on the dollar," he explained.

"From a macro standpoint you want to be in energy. The U.S. is going to be energy sufficient," Lasry said. "Over the course of the next two, three or four years, [investors] are going to end up doing well." Lasry declined to name specific companies because of compliance restrictions.

"The question is are they going to have any issues where they've got to refinance that debt or have access to that capital. If they're able to, then those equities are going to be worth quite a bit," he noted. "If they're not able to, then firms like ours will get control of that asset. And if we get control of that asset, then we've actually ended up creating that equity extremely cheap."

But, "that's the piece of it if you're playing at home you can't really participate."

Shares of major oil companies, such as ExxonMobil, Royal Dutch Shell and Chevron, have withstood the fall best.

"The big oils should be the first destination for new money in the energy sector," Doug Terreson, an energy analyst at ISI Group, told Barron's. "This is an unloved, fairly defensive group that is significantly underweighted in institutional portfolios."

He notes that the companies have curbed their excessive capital spending, and he likes their dividends.

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The slide in the price of oil in October has created buying opportunities, says hedge fund star Marc Lasry, CEO of Avenue Capital Group and co-owner of the Milwaukee Bucks.
Lasry, oil, energy, stocks
372
2014-13-31
Friday, 31 October 2014 12:13 PM
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