Justin Leverenz, the portfolio manager at Oppenheimer’s $22 billion Developing Markets (ODMAX) fund may not be getting enough sleep recently – after all, the MSCI Emerging Markets index is down more than 21% year to date ending Sept. 21. In a recent interview, he had a few positive words on Petrobras despite his short-term frustration:
Leverenz shares nearly every emerging market portfolio manager’s frustration with oil major Petrobras (PBR). It’s secondary share offering in 2010 irked investors, and diluted share value. Investment banks that had targeted the stock to reach $62 were sadly mistaken after the government’s massive $70 billion equity issue. PBR is now trading under $25 at just 6 times trailing earnings. It’s either a cheap buy, a value trap, or a dud. Depending on your poin of view.
“I’m more frustrated on Petrobras near term than I am long term. The Santos oil basin off the Rio coast is the biggest resource opportunity since the Gulf of Mexico and the North Sea. Petrobras’ share offering wasn’t managed very well. You could see earnings disappoint. But how many major oil companies out there are discovering oil and are open to public investors? Any oil company would love the deal Petrobras got from the government, which is dominance of the newest and biggest oil discovery in the world. Will there be challenges along the way? Yes, and investors need to consider that. But the fact is that Petrobras runs a very large oil basin in the Atlantic. It’s a long term asset that will prove to be the most prolific opportunity in the industry,” Leverenz says.
Full article here.