Third Point's Loeb: Returns to Energy Stocks May Disappoint (XLE; XOP)

As the old timers used to say: "Well bought is half-sold" meaning it's easier if you bought it cheaper.

We've been saying it's too early since last year and expect at least one more leg down in both crude and the equities. We use the big ETF's, XLE and XOP, as mental proxies for the current state of play, here it is graphically from FinViz:

 

That second bottom got to $71.70, less than six bucks away from the last print at $77.42.

Here's Bloomberg with a slightly different take:

Hedge fund manager Dan Loeb warned investors against expecting unrealistic returns if they’re counting on investing in energy companies on the cheap.

“All of the funds that have been set up to capitalize on distress in the oil patch might be disappointed, kind of like European funds that were set up to capitalize on European distressed-debt situations,” Loeb said Friday in a conference call discussing results at Third Point Reinsurance Ltd., the Bermuda-based reinsurer that he co-founded.

Investors including Leon Black’s Apollo Global Management LLC have sought to temper investor expectations, even as they raise funds to prepare for further disruption in the energy market. Oil prices are poised to climb in February after seven straight monthly declines.

Loeb said that in the energy industry, he’s focused on companies like refiner Phillips 66, where he believes price fluctuations have been “exaggerated.” The Houston-based company fell from a peak of almost $88 in September to a 2014 low of $64.02 in December. The stock traded at $78.46 at 4:15 p.m. Friday in New York.

“When the equities themselves sold off hardest, we were trying to be patient and wait for the inevitable next shoe to drop,” Loeb said. “But equities have already moved up in anticipation of the recovery. We’re pretty much on the sidelines in energy.”

Third Point Re had a fourth-quarter net loss of $14.7 million, compared with profit of $80.1 million a year earlier, according to a statement Thursday after markets closed. Bets on government and corporate debt weighed on investment results.

‘Poor Trading’
“Our performance was diminished by poor trading and excessive exposure in an environment of increased market volatility,” Loeb said Friday.

Third Point exited its Greek credit holdings, and has a large exposure to Argentina, Loeb said. While his hedge fund profited in 2012 after buying Greek sovereign bonds, Loeb said in a February letter that he was concerned about liquidity risks in the nation....MORE