HOUSTON(Dow Jones Newswires), June 1, 2010
One fund has taken its contrarian philosophy to a new deep-sea level.
Jim Goff, the research director for Janus Global Research Fund (JARFX), was quick to buy shares of Halliburton despite its involvement with the Deepwater Horizon rig that exploded, killed 11 and has been spewing oil into the Gulf of Mexico since April.
"We bought (Halliburton) because it was beaten up. We feel that given what happen, or our understanding of what happened, it was not (its) fault and it will not have significant liability related to this," Goff said. Halliburton did cementing work on the rig.
"We also try to evaluate reputational risk, and we don't feel that (Halliburton's) reputation is going to be harmed," he added. "It may be harmed in the newspaper but it won't be harmed" as far as its customers are concerned.
The Janus fund is not alone in being positive on Halliburton. Analysts at Canada's Canaccord Genuity recently told clients Halliburton appeared to be oversold because its "involvement in the spill has been well publicized but also somewhat misunderstood." Halliburton's liability is "likely limited to tort damages and personal injury," they wrote.
But Janus appears to be in the minority. Since the April 20 accident, shares of many energy stocks have fallen, primarily Halliburton; BP, which was leasing the rig; and Transocean, the owner.
Shares of BP have lost more than a third of their value and were trading down about 12% to $37.80 Tuesday after another attempt to stanch the flow of oil in the Gulf of Mexico failed. Halliburton shares have lost about 30% of their value and were trading around $22 Monday, whereas Transocean, at around $52, has lost more than 40% since April 20, the day of the explosion.
After the disaster, the Janus team spoke with executives, lawyers, Washington insiders, BP suppliers and others before making the decision to buy Halliburton in late April or early May, Goff said. He said he could not give the exact date, price, or volume of the transaction.
Unlike most funds, this one is run by a group of 38 researchers. They sought to better understand the Oil Pollution Act of 1990, which places all responsibility for the stanching of the well and clean-up of the mess on the operator of the well, which is BP.
But Goff and the researchers also saw something more basic when he looked at Halliburton: strong earnings.
"The fundamentals are strong particularly outside of North America," he said.
"It makes it really simple. The only way you add value is by strong selection within sector and that really puts the spotlight on adding value through research," Goff said.
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