William "Travis" Koldus of KCI Research rejoins the Marketplace Roundtable Podcast to discuss his investing experience as reflected in his The Contrarian research service.
An investor's formative years tend to have an impact on their investing strategy and Koldus is no different in this regard. He "came up in a value background, when most of the well-known investors were value guys." Value has been out of favor for 12 years and counting, and while Koldus has adapted his approach as markets dictate, he still maintains a value bias -- as well as a natural contrarian streak. "It's always more fun to win as the underdog," he says. "I firmly believe there's a lot of contrarian biases that go into the investing market."
Recently, growth and long-duration assets have outperformed, buoyed by the chase for yield that has accompanied record low interest rates. As a contrarian, Koldus maintains an interest "in all the other stuff that haven't gone along with the market." One of these is energy.
"If you look at the S&P 500, energy is near its 20-year low in terms of weighting." The sector has underperformed since 2011 and this became more pronounced starting in 2014. Oil prices bottomed in 2016 but equities have not followed. "There's a lot of major energy producers that are outside the major indices...that are down 70 or 80% the last couple of years."
There is a "rationalization of supply that is going on in the market right now" leaving many energy stocks in a near-perfect position to outperform. "Low prices are the cure for low prices," says Koldus. "If you look below the surface, the realized prices that some of the companies are receiving, particularly for the natural gas liquids...it's forcing a fast rationalization and you seeing that now."
Indexing is not the best way to benefit from this dichotomy. "You want to be an active stock picker," says Koldus. "That's where the real opportunity is." Nobody likes natural gas now. Investors could buy a natural gas ETF, but these rarely contain the leading companies in the index. Koldus discusses his ideas for natural gas companies at length in the back end of the podcast.
Topics Covered

2:00 - Investing strategy

3:15 - In what areas of the market are you seeing biases now?

5:30 - Is energy ripe for outperformance?

7:30 - Divergence between oil prices and energy

12:30 - Key lesson learned in general

19:00 - Lesson learned this past year

20:45 - What's an investor to do now?

26:30 - What to look as turning points for the market

31:00 - Stock picks... index vs. individual stocks (AR) (AM)

40:00 - Environment, natural gas and alternative energy


Learn more about your ad choices. Visit megaphone.fm/adchoices