• Happy Mother's Day! Recent market rallies indicate investors were overly bearish. I've been evaluating our targeted equities' valuations and portfolio construction.

• Walter Schloss advises buying assets at a discount rather than earnings and that is the template we are following here.

• Tangible book value discounts offer significant investment opportunities.

• Offshore drillers like BORR and RIG, despite debt, show high equity return potential if they deliver free cash flows and reduce debt.

• Peabody Energy is in a strong position, trading at substantial discounts to tangible book value, generating positive free cash flows, and they now have significant optionality.

"Try to buy assets at a discount rather than earnings. Earnings can change dramatically in a short time. Usually, assets change slowly. One has to know much more about a company if one buys earnings."

- Walter Schloss

Introduction

First, happy Mother's Day to all.

Second, judging by the futures price action, where the rally that began from the depths of April has continued, investors were indeed far too bearish several weeks ago, as I noted with my article about near record negative sentiment.

Third, over the past few days I have been playing with a couple valuation tables as I brainstorm about our targeted equities, specifically how they are valued today, and portfolio construction.

On this note, I often think of one of my favorite articles that I have authored, which was titled, "Own The Best Assets & Let Time Take Care Of The Rest."

Building on that narrative, I love the Walter Schloss quote above, which says to own the assets, not the earnings.

With that background, let's look at a discount to tangible book value table that I have put together.

Discount To Tangible Book Value

One of our favorite plays over the years has been buying equities at a discount to their tangible book value, or a discount to their replacement value, and then waiting as enterprise value is transferred from debt to equity as earnings and free cash flows rise from temporarily downtrodden (often due to capex investment or temporary low prices) and/or depressed levels.

Thinking of that framework, let's examine a table that I put together below that features some of our targeted equities, specifically Transocean RIG 0.00%↑ , Peabody Energy BTU 0.00%↑ , Borr Drilling BORR 0.00%↑ , Alibaba BABA 0.00%↑ , Sibanye Stillwater SBSW 0.00%↑, Cleveland Cliffs CLF 0.00%↑ , Seadrill SDRL 0.00%↑ , Leggett and Platt LEG 0.00%↑ , Woodside Energy WDS 0.00%↑ , Noble Energy NE 0.00%↑ , U.S. Steel X 0.00%↑ , New Fortress Energy NFE 0.00%↑ , Valaris VAL 0.00%↑ , Coterra Energy CTRA 0.00%↑ , Devon Energy DVN 0.00%↑ , Expand Energy EXE 0.00%↑ , Antero Resources AR 0.00%↑ , EQT Corp EQT 0.00%↑ , Range Resources RRC 0.00%↑ , Newmont NEM 0.00%↑ , Comstock CRK 0.00%↑ , and Advanced Micro Devices AMD 0.00%↑.