Marquette University Philosophy Professor, Dr. Curtis Carter, presented his “Investing in Art” lecture to the AIM students

Dr. Curtis Carter provided a command performance for the Marquette students in the AIM and Alternative Investments classes on April 24, 2017

Dr. Curtis Carter in the AIM Room lecturing on 'Investing in Art'

On Monday, April 24, the students in Dr. David Krause’s Alternative Investments and AIM classes were visited by Dr. Curtis Carter. 

Krause stated, “Dr. Carter is a valued colleague. He is a professor of Philosophy at Marquette University, where his concentration is on aesthetics - he received a PhD from Boston University.

Dr. Curtis Carter, Marquette professor 

Andy Warhol
Portrait of  Marilyn Monroe

Dr. Krause added, “Dr. Carter is acknowledged as an international expert and has accomplished much in his career; however, I believe his most significant achievement at Marquette University has been the creation of the Patrick and Beatrice Haggerty Museum of Art.  Dr. Carter was the founding director from 1984-2007 and he is responsible for its incredible success. The Haggerty Museum has built a greater appreciation for the arts in the Milwaukee and Marquette University community.”

Dr. Carter’s lecture focused on the theme of investing in art – and he showed and discussed some of the most significant works of art. Here are some of his major points about investing in art:

• Buy Out of Style.  “The art market is cyclical”—artists go in and out of fashion, but so long as they are/were talented enough, and were popular enough, there’s a good chance that they will be back in style.

• Buy Obscure but Important Work. Some collecting categories are improbably affordable because few people know about them.

• Buy Outside the Narrative. The worth of a work is often tied to its art-historical significance. Yet, pieces that fall out of that historical narrative can be found for an outstanding bargain.

David Krause and Curtis Carter

According to Krause, “Dr. Carter’s lecture on both the personal and the societal importance of the visual and performing arts was greatly appreciated by the students. His lecture included material on ‘art as an investment,' which students found fascinating. He is a true friend of the AIM program and one of Marquette's greatest assets.” 

An AIM Fund holding: Golar (GLNG) by Armando Avila. “Still some solid upside for the rest of 2017"

Golar LNG Limited (GLNG, $26.67): “The Second Half of 2017 Can Prove to be Successful for Golar LNG Limited”

By: Armando Avila, AIM student at Marquette University

Disclosure: The AIM Equity Fund currently holds this position. This article was written by myself, and it expresses my own opinions. I am not receiving compensation for it and I have no business relationship with any company whose stock is mentioned in this article

 Summary

·      Golar LNG Limited (NASDAQ: GLNG) is a midstream liquefied natural gas (LNG) company that provides LNG shipping, storage and regasification services. The company has an established international presence in LNG and maintains a leading position in midstream.

·      LNG production is expected to increase to 292 mt in 2017, a 34 mt increase from 2016 which creates growth opportunities for Golar LNG.

·      The company has partnered with Schlumberger to maximize the efficiency of its operations in LNG.

·      Volatile charter rates, along with increased competition, are risks that can potentially reduce the company’s profitability in 2017.

·      Management remains optimistic that the company will continue to be a leader in the development of real solutions in Floating Liquefied Natural Gas (FLNG), Floating Storage and Regasification Units (FRSU) and shipping.

Key points: In 2014, the company ordered its first FLNG based on the conversion of an existing high quality LNG carrier, the Hilli Episeyo. Currently, the Hilli is in final stages of construction in Keppel, Singapore. The cost of the FLNG is on budget and expected to be completed before the end of 2017. In addition, management has stated that the company will make an initial investment in another FLNG project, the Fortuna, in Equatorial Guinea.

2017 LNG production is forecasted to exceed 2016 levels by a substantial amount. In 2017, global production of LNG is forecasted to be 292mt, a 34mt increase from 2016. Currently, there are projects underway to ramp-up liquefaction plants that are scheduled to begin operating in 2017. The vast number of projects should help the industry meet or exceed forecasts. Natural gas accounts for 25% of global energy with 10% coming in the form of LNG. These figures should increase in coming years as LNG use in transportation is expected to increase due to lower carbon dioxide emissions. GLNG is positioned to take full advantage of the industry growth through its FLNG projects and new LNG shipping agreements.

Despite recent investments and economic outlook, the company remains vulnerable to volatile charter rates. Due to the tanker markets cyclical nature, the company’s vessels profitability will depend on economic conditions in the tanker market, demand for oil and oil products, global economic conditions and changes in transportation patterns. Additionally, the company operates in the spot market, the market for chartering an LNG carrier for a single voyage, which leaves the company with more uncertainty and volatility due to shorter term contracts. In 2016, spot trading increased to 18% from 15% a year prior indicating that charter rates will remain a threat to company revenues if spot trading continues to increase.

Competition in the industry also poses a threat to GLNG. Many oil shipping companies are entering the industry leaving GLNG at a disadvantage since the company exclusively operates in the LNG shipping market. Major oil companies are positioning themselves to become major players in LNG shipping, failure to compete with large companies will lower GLNGs revenues.

What has the stock done lately?

So far this year the stock has increased 15.56%. Additionally, the company has sold $402.5 million aggregate principal convertible senior notes due 2022. The company intends to use the proceeds to cap the cost of initial capped call transactions and other general corporate purposes.

In a recent earnings call, managements expressed optimism that LNG production will increase and LNG carrier markets will improve in 2017 and in coming years. GLNG is focused in FRSU businesses and management has expressed their goals of positioning the company in the best possible place to develop future FLNGs and FSRUs.

Past Year Performance

Share prices have increased 35.95% from a year ago and shares are trading at $26.67. In Q4 2016, the company reported a net loss of $13.7 million and EBITDA loss of $15.9 million. The increase in losses was attributed to weaker performance in the overall fleet from the Cool Pool, a vessel in the Marshall Islands.  Despite Cool Pools underperformance, the company mitigated losses from WAGL for the Tundra, a FSRU built in 2015 chartered by West Africa Gas Limited (WAGL).

                                                                       Source: Factset

                                               

My Takeaway

Golar Limited is a company that is positioned to take advantage of the rising production of LNG in 2017. With low commodity prices, gas has the potential to displace other fossil fuels and play a bigger role in the energy sector. A joint venture with Schlumberger will allow the company to develop new FLNG opportunities and become a more important player in the industry. I anticipate the LNG industry to perform well in 2017 and once the company’s Hilli FLNG is finished later in 2017 the company will see more upside.

                                                                                    Source: Factset

Chris McGuire and Dan Farrell of Phalanx Capital Management Visited the AIM Students at Marquette on April 19, 2017

Last Week Marquette Students Learned About Arbitrage-Based Hedge Funds from Chris McGuire of Phalanx Capital Management



Chris McGuire of Phalanx Capital Management

Phalanx Capital Management, a Chicago-based Asian Volatility Multi-Strategy Hedge Fund, was founded in 2004 by Chris McGuire (a 1991 Marquette University alumnus). 

Dr. David Krause, AIM program director said, “The Phalanx fund has received numerous awards over the years and is considered to be one of the more creative (and non-correlated) hedge funds in existence. Chris McGuire has helped Phalanx investors receive positive year-over-year returns in 11 out of 12 years since the fund was founded.”

Chris McGuire told the AIM students – and those in the Alternative Investments class - that Phalanx pioneered the enhancement of traditional convertible bond arbitrage with volatility and credit strategies. 

Dr. Krause said, "Chris did an excellent job explaining how Phalanx gains its exposure through the buying of cheap or mispriced options in Japanese and other Asian firms. He noted that they deliver “alpha” through three main strategies: convertible bond arbitrage, volatility arbitrage, and equity opportunistic strategies."

Dr. David Krause, Chris McGuire and Dan Farrell

Chris McGuire was joined by Dan Farrell, Phalanx’s director of investor relations. Chris talked about his various experiences since graduating from Marquette – including time spent in London and Tokyo. He explained why their investment focus is on Japan and how they are able to exploit unique structural inefficiencies that do not exist in the rest of the world. The students were interested to learn about the firm’s use of asset swaps, convertible bonds and options. Dan talked about his background and how Phalanx seeks the right expectations match with their investors.

Dr. David Krause stated, “It was great to have Chris and Dan address the students. Also we really appreciated them taking the time to meet with small groups of students after their presentation. With Chris having two decades of experience in trading international options and convertibles, it is clear that Phalanx provides the experience and analytical skills to identify pricing anomalies in the convertible bond and volatility markets. It was very interesting and we’re thankful they again visited us for a day.”