Imagine this: You are at a stock investment conference where dozens of companies bring their leadership to tell their story to potential investors. You, the investor, get to choose from several companies presenting at the same time. In one room, there is a very popular company, and the room is overflowing with analysts and portfolio managers who love it. You, however, being a contrarian, choose to see a different company that does not attract a crowd. In fact, in that room there is just one other investor besides yourself and a lot of empty chairs. That’s when the other investor turns to you and says, “I guess this is the bottom.” And you say, “Could be …”
We’ve been there. It’s always lovely to meet a fellow investor who appreciates what’s unpopular and downtrodden. And we’ve always preferred companies where expectations are low and easy to exceed to those where expectations are high and easy to disappoint.
This week, we had a similar experience. This time, though, the entire conference was empty.
It was an oil and gas conference that we’ve been attending for several years. While it’s been typical in recent years for 40 to 50 companies to present, this year there were just 12 who bothered to show. While usually several hundred investors attend, this year there were probably only a quarter of that number, if that. And the feeling in the rooms: downright lonely and desolate.
Investors, it seems, have fled oil and gas nearly completely. Whether this is a contrarian signal we don’t know — but it does look like enough stuffing has been kicked out of the industry to start paying attention. When things get this bad, the chances of the next surprise being a positive one only grow.
As George Soros once put it, “The worse a situation becomes the less it takes to turn it around, the bigger the upside.” And even if a turnaround may not be coming immediately, for the patient, it’s time to take notice.
