Sustainability of Shale Expansion is Diminishing

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The current levels of shale expansion are unsustainable and are expected to remain flat moving forward, signaling an end to the significant increase in supply from shale plays. On the demand side, there is a misconception that fossil fuels will soon be obsolete, largely driven by political narratives rather than factual analysis. The rising energy consumption in developing regions, particularly China, India, and parts of Africa, highlights a projected increase in overall oil demand by 60-70% if their energy consumption reaches even that of China. Policy measures aimed at phasing out fossil fuels could perpetuate energy poverty in these nations.

On today’s episode, Kyle Grieve chats with Scott Barbee about how he managed to maintain a deep value-based strategy while it’s gone out of fashion, the three buckets of risk Scott uses to assess businesses, what a genetic contrarian is and why it can be a powerful advantage, why fossil fuels aren’t going anywhere anytime soon and why opportunities exist in that industry, how he navigated a 72% drawdown during the GFC, and a whole lot more!

Scott is the founder of the Aegis Value Fund. Which was created in 1998. Prior to Aegis, Scott worked as an analyst covering oilfield services at Simmons & Company. He also had a stint as a deep value advisor for Donald Smith & Company. He received his MBA from the Wharton School and the University of Pennsylvania. He also holds a B.S in Engineering and a B.A in Economics.

IN THIS EPISODE YOU’LL LEARN:

00:00 - Intro

02:41 - Some of the key lessons he learned from investing legends like Bill Ackman, Bob Robotti, Peter Cundill, and Walter Schloss

08:17 - How Scott has managed to maintain a value-based strategy when many investors have bailed to chase more expensive stocks

12:00 - Scott's three buckets of investing risk

16:10 - A breakdown of the concept of a "genetic contrarian."

17:30 - Why risk management is key to investing in businesses with high levels of uncertainty and how to take advantage of it

24:27 - Scott's views on energy and how fossil fuels are unlikely to disappear anytime soon

33:36 - The potential downsides Scott sees in super high-quality businesses

34:41 - Why lower-quality businesses with volatile earnings look very attractive right now due to a widespread de-leveraging

43:55 - How Scott dealt with a 72% drawdown during the GFC

And so much more!

Disclaimer: Slight discrepancies in the timestamps may occur due to podcast platform differences.

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