Once more, I made a bad decision in my investment in the oil sector. I had bought BAZAN, Israel Oil Refineries, for 3 shekel a share. Since the refinery business collapsed, its worth went to 1.5 and since I didnt see any future in teh refining business, I sold them at a 40% loss and bought BEZEQ.
Oil Refineries Ltd. (TASE:ORL) today published its financial report for the third quarter of 2009. The company posted a net profit of $100 million for the quarter, compared with breakeven for the corresponding quarter of 2008, even though revenue fell 45% to $1.15 billion for the third quarter from $2.62 billion for the corresponding quarter.
Net (adjusted) refining margin per barrel was unchanged from the corresponding quarter at $8.10. The net refining margin in the third quarter was much higher than the $1.60 per barrel benchmark Ural margin in the Mediterranean Basin reported by "Reuters". Oil Refineries attributed the difference to upgrades of its facilities, changes in the crude oil mix it refines compared with Ural crude, continuous operation of its facilities despite the decline in refining during renovations, and end effects in the spot market. A unique integration of the fuel industry, together with the aromatic and polymers industry gives Oil Refineries a leading standing in a competitive environment."
Oil Refineries' share rose to NIS 2.18, giving a market cap of NIS 4.32 billion.
3 comments:
Seems to me that a simple buy and hold strategy is an effective and painless way to benefit from companies engaged in supplying vital needs. The demand for food, real estate, oil, banking and basic commodities will put a bottom on the share of those companies as long as they don't engage in massive fraud.
Agreed, but demand for refined oil products is decreasing and is supposed to fall even more with electric cars. Refining capacity in the Mediteranean area is excessive, and refining margins are thin. Refining, I concluded, is a bad business to be invested in. So I sold and went into Bezeq, a copper line telecommunications company in Israel. Hope that in one year I'll be proved right. Right now I am losing.
In my limited and possibly ignorant view, powerline communication technology share the near fatal flaw of all semiconductor-based business, the moment it proves successful, the giant fabs ramp up production (in China) so high that all the expected profit margins disappear due to overproduction. Capitalism can work only so long as there are profits and enough jobs to go around. The way things have worked out to a first approximation is this: the designs are finalised and tested in places like California and Israel, but all production is handed over to Chinese because they are the lowest cost producers. Under these circumstances no one wants to an (electrical) engineer since he'll be directly competing on wages alone with the Chinese. The French and Japanese have a better way, they may not have all the fanciest electical gizmos in their shops as their markets are protected, but a generation from now they will still have their fair complement of engineers. I am jobless and that colours my views. It has to be accepted though that mere capability in high-tech will not ensure good jobs for the mass of people, unless it is accompanied by a strategy of ensuring that the benefits flow first of all to your own citizens.
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