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Kyle Bass Recommends Investments In The Energy Sector: The Time Is Now

January 2, 2016 8:05 pm
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  • The people at Wall Street Week were kind enough to share a preview of this Sunday’s show with Benzinga.
  • The upcoming episode will feature Kyle Bass, founder and principal of Hayman Capital Management.
  • The investor, who manages more than $16 billion in assets, went into several topics including his ongoing pharmaceutical patent battles and the state of the energy market.

In a wide-ranging conversation, Bass looked into oil production in the U.S. “We were the marginal swing producer for the world,” he assured. “And now we're going to go down a million barrels a day, I think, in the next 12 months. So, we're going to go from a glut to all of a sudden a deficit. And the world's not ready for a deficit.”

Related Link: Kyle Bass On U.S. Oil Production: We're Going From A Glut To A Deficit, 'And The World's Not Ready'

So, what should long term investors do about this? Co-host Gary Kaminsky asked.

“If you are going to allocate capital [into the energy space] for the next three to five years, you should do it now [within the next six months],” Bass advised. Now, which industry sector you should invest in, that depends on “where you have expertise,” he added. “Those businesses are dominated by those who have expertise in each of those verticals; and, you better get with those people to decide where in the cap structure to invest.”

For instance, upstream MLPs’ equities trade for pennies, their subordinated debt trades around the 20s and 30s, and their senior debt, in the eighties, he explained. No one knows when upstream MLPs file bankruptcy, “which many of them will,” Bass stated. Bottom line, the answer is not univocal, but rather, quite difficult.

So, for the long term investor crowd, the best way to go might be buying a crude oil ETF, which allows them not to “bet on a specific management company” nor worry about cap structures, Bass concluded. “If you can hang on to that for 18 months or two years, I think you are going to do very well.”


Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.

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