The overriding theme for investors in 2015 continues to revolve around the collapse in the price of oil.
With the price down nearly 50% from the summer, the major question centers around how long will oil prices stay depressed.
If they remain this low for a long time frame, say anything longer than a year, the major importers all over the globe clearly benefit (United States, China, Japan, India, Europe).
Next, the impact for anything related to consumer spending is very good as when people have more dollars in pockets.
If history is any judge, they will spend it.
Investors have woken up to this probable outcome and have rewarded, to a small degree, the consumer discretionary sector.
How long this lasts is based on the market price of oil.
As commodity prices are historically volatile, one man’s guess is probably as good as another.
In my opinion, oil prices may rebound far quicker than anyone believes, but it does take time to see reduced capital expenditures and the shelving of large projects work through the system.
We also could very well see far more merger and acquisition activity in the energy space because it very well may be cheaper to buy the assets of whole companies as opposed to spend money on organic possibilities.
Steak ‘n’ Shake
With respect to the specific holdings in each of our portfolios, in the Long Term GARP model, we added the diversified holding company Biglari Holdings (BH) to the portfolio.
Among its holdings are the Steak ‘n’ Shake and Western Sizzlin’ restaurant brands.
While controversial, Sardar Biglari is both a proven entity as an investor and operator, and I like the way he is building his company.
In the Concentrated Long Term GARP model, we added Vimpelcom (VIP), which is the largest telecom provider in Russia, and many other countries.
Interestingly enough, it has twice as many subscribers as both Verizon (VZ) and AT&T (T), and sells at a fraction of the price due to the issues in Russia and the depreciation of the ruble.
DISCLAIMER: The investments discussed are held in client accounts as of December 31, 2014. These investments may or may not be currently held in client accounts. The reader should not assume that any investments identified were or will be profitable or that any investment recommendations or investment decisions we make in the future will be profitable. Past performance is no guarantee of future results.