The Business of Value Investing.pdf

More Than One Way to Find Value 217

Equity prices across all industries have fallen to levels not seen

for decades. Mr. Market, in his usual modus operandi, is not dis-

criminating between healthy, solid businesses, such as many oil

companies, versus severely impaired businesses, such as some in the

auto industry and the fi nancial industry. For the true value investor,

this historic market sell - off has created investment opportunities of

historic proportions. Forget about investments that double in price

or even the proverbial 50 - cent dollar. After the market sell - off in

late 2008 and again in early 2009, when the Dow Jones fell below

6600, the opportunity to fi nd multibaggers — or investments that

are worth multiples of the current stock price — and 10 - cent dol-

lars was afforded to those investors willing to be patient. Given the

severe depth of our economic recession, it could be 2011 before

any rational recovery takes hold. But all investors realize that mar-

kets are forward - looking creatures. As Buffett said in October 2008,

“ If you wait for robins, spring will be over. ”

A sample of the fantastic bargains that Mr. Market served up to

investors in March 2009 is presented next.

ATP Oil and Gas ( ATPG )

This oil and gas outfi t had a market value of $ 115 million, with

a current P/E of 1.3 and a forward P/E of 4. At the end of 2008,

net debt approximated $ 1.3 billion, so the enterprise value of

the company was $ 1.4 billion. Management owns 20 percent of the

company; they think like shareholders because they are sharehold-

ers. Most of the debt comes due in 2013. The company operates

exclusively in the Gulf of Mexico and the North Sea via a hub - type

concept, meaning that all of its oil platforms are clustered together.

Such an operating model is advantageous because it gives the com-

pany greater effi ciency over its operations.

At the end of 2008, the company had proven reserves of approx-

imately 120 billion barrels of oil equivalent. The company ’ s success

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