I couldn’t help myself. I really did not want to do it. Circumstances forced my hand. I bought another energy related company today after they (shocker) missed earnings forecast. This firm I bought on the services side of the coin and not E&P. The stock is literally too cheap not to own and the margin of safety is huge so I had to buy it.

We have been looking for place to double down and lower our cost basis on our other energy holding but I am still hearing way too many folks talking about the enormous opportunity in energy stocks from this level. There is not quite enough blood, vomit and general gnashing of the teeth for me to feel like we are closing in on oils low water mark just yet I am well aware that Saudi Arabia needs something like $85 a barrel to balnce its budget nut as long as they are getting more than $27 they are not losing money. I think it is when they get close to them losing money for every barrel out of the ground that they will be forced to consider a policy change. Closer to $30 and we will start to see the type of margin calls, broken levers and trophy divorces that mark a buyable bottom that allows us to double down and possibly take on more positions.

It is worth noting that at the OPEC meeting there are signs that not everyone want so to play the market share game much longer. Even as the official form the UAE said that they would be increasing production Oman oil minister Mohammed bin Hama al-Rumhy said “This is a man-made crisis in our industry we have created. And I think all we're doing is irresponsible.”

On the happier side of things the Bank Director M&A survey is out and it is still a pretty rosy picture for community bank M&A activity. The majority of respondents believe that the outlook is getting better and most think they need to grow their bank a lot faster to achieve scale that allows costs to be reduce as a percentage of revenues. The smaller banks feel that they must get above the Billion dollar mark and from my chair the only way to accomplish that in anything close to a reasonable time frame is to buy another bank. That should bode well for us.

If it seems that I spend a lot of time talking about small banks and oil stocks itis because I do. That’s what cheap right now so it is where I am spending a god deal of my time. One of these focus areas is working very well as expected and one not so much. While some measure of that is to expected we may have an answer to this all too zig and zag familiar problem for value investors from a most unlikely source . The answer may actually come from price momentum. I spent some time recently working on a combination of deep value asset based investing with dual momentum and it actually help significantly in avoiding disasters. I wrote about this and Real Money today and said that “One reason for the outperformance is that this model portfolio sidesteps disaster. The portfolio owned no tech names in 2000, no banks in 2007 and no energy in 2014 and 2015. Because the performance has to be positive over the past year, it does not get caught owning stocks that have simply gone down less than the market.”

Lots of studies have been conducted on the combination of value and momentum but most of them used decile comparison or of late the value and growth ETFs. I have never seen just the absolute values of price to book value and an advanced concept of momentum combine to manage a portfolio and I think this approach has significant value and I will be exploring this a lot in the days and weeks ahead. I may even go round up a couple of MBA kids who want to work on an expanded project on the subject.

I am in Kindle heaven as the holiday season approaches and the publishers are rolling out tons of titles evey week. I am spending all my time not researching, testing or searching for stocks and strategies on trying to stay head of the weekly Tuesday new book dump. So far I am keeping ahead but a look at the weeks ahead tell me I may have to find another hour or two a day to keep even. Although most of my off hours reading is recreational I think that, given the times we live in, that Thomas Jefferson and the Tripoli Pirates: The Forgotten War That Changed American History by Don Yaeger to be a potential great read as well and will cracking it open this weekend. Give books this Christmas and make the world a little better – and more literate place. If you have stacks and stack of book around the house as I often do consider packing them up and shipping them to http://www.bookthing.org/ or find a local equivalent.

Make a note that next week is a full on publishing Holiday. Long time subscribers know that when I have all the kids together we take a publishing break unless something spectacular happens. With my oldest married and living in Chicago and my son getting very career focused down here in Orlando it just dent happen that much. So no letter, weekly updates or anything else after Wednesday next week unless there is a major event. Give that it is the only holiday each year that features win, excessive food consumption with no gift giving required I suggest you folks do the same.

Have a great week everyone

Tim

As we head into Holiday Season keep in mind what’s really important and that its all just a

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