David Tepper loves the "much loathed" world of oil stocks, he revealed this week.
At the Robin Hood Investors Conference Wednesday, the billionaire told the audience that equities "were the place to be" with interest rates this low, emphasizing the FAANG stocks, according to Bloomberg.
But he also said that oil stocks "are the cheapest equities by every measure because people hate them" and that he's long "many of them".
The head of Appaloosa told the audience that Occidental Petroleum Corp. was "incredibly cheap" and had the potential to climb from current levels around $30 to about $45 or $50 per share. He also said that the day Exxon added activist investors to its board was the day to buy oil stocks. He said the addition signaled that drilling "will eventually decrease over time" and supply will follow.
Tepper also said Amazon would be a great place to park his money over the next decade and that he didn't think the Fed would tape until "unemployment falls significantly." He noted that he though inflation was "transitory to a certain extend" and that he owns "some" crypto but that he isn't a believer.
Finally, he told the audience he'd only invest a maximum of 10% in China because of "the legal lack of protections for investors."
Recall, we wrote just days ago about how the rise in activism in oil and gas was benefitting state-run oil companies in places like Saudi Arabia and Russia. Even as the supermajor oil companies shrink in size and adhere to incessant criticism, fossil-fuel demand holds strong, according to Yahoo Finance. Activists have been the busiest they have been in years...
Recent weeks saw Exxon and Chevron rebuked by their own shareholders over climate concerns, while Shell lost a lawsuit in the Hague over the pace of its shift away from oil and gas.
...and this has been a tailwind for national oil companies (NOCs) and state owned players who aren't under the same pressure to play ball with activists. The report notes that "Saudi Aramco and Abu Dhabi National Oil Co. are spending billions to boost their respective output capacities", as is Qatar Petroleum.
NOC's share of global oil output is expected to rise to 65%, from about 50% today, by 2050. Companies like Exxon and Chevron are keeping output at lows and curtailing future investment in traditional oil and gas infrastructure.
Patrick Heller, an adviser at the Natural Resource Governance Institute, told Yahoo Finance: “We hear government officials and NOC officials say, ‘We look at the divestment of international oil companies from some projects as an opportunity for us to grow. And I do think that’s potentially really risky.”
Jason Bordoff, director of the Center on Global Energy Policy at Columbia University’s School of International and Public Affairs, thinks that the shift to government owners could wind up doing just the opposite of what activists are intending on doing.
Earlier this month, we also wrote how Saudi and Russian oil producers were benefitting from activism in the industry involving Western producers. Wins in the courtroom for activists against Shell, Chevron and Exxon have been a tailwind for Saudi Aramco, Abu Dhabi National Oil Co and Gazprom, we wrote. The pressure for U.S. names to cut carbon emissions faster pushes more business to companies in Saudi Arabia and Russia, and to OPEC, Reuters reported.