I’m “done with fossil fuels.” That’s what Jim Cramer just said on CNBC’s Squawk Box. Cramer compared fossil fuel companies to the stigmatized tobacco companies, saying oil stocks are in the “death knell phase.” But if that’s true, I wonder why billionaire oil tycoon and hotelier Bob Rowling just bought $5.6 million of beaten down Northern Oil and Gas (NOG)?
In a Form 4 filed yesterday evening, Robert Rowling disclosed he purchased 3,364,000 shares of NOG. Average cost was $1.67. Rowling must file as an insider because he owns greater than 10% of Northern Oil. Rowling first took an NOG stake in Nov. of 2014, buying 6 million shares at over $8 per share. After the recent buying, the Dallas-based investor owns 80.07 million shares of NOG. That’s about 19.73% of the company’s outstanding shares.
Forbes estimates that Bob Rowling has a net worth of $6.2 billion. He parlayed the sale of his family’s oil company in 1996 into the purchase of Omni Hotels. Rowling’s TRT Holdings also owns Gold’s Gym, with 700 locations nationwide. TRT Holdings is Northern Oil and Gas’ largest shareholder.
In addition to Bob Rowling, two other investors have disclosed 5%+ stakes in NOG and taken an activist stance.
In the past there has been speculation Rowling my seek to take control of NOG.
TRT Holdings is not the only firm eyeing Northern Oil and Gas. In August of last year, New York-based hedge fund Angelo Gordon & Co. disclosed an 8% stake in NOG and stated that it intended to communicate with the company’s
“management and Board of Directors (the “Board”), as well as holders of equity or debt securities or other indebtedness of the Issuer, regarding potential transactions involving the Issuer’s indebtedness that could facilitate the return of capital to shareholders and potential financing transactions, as well as related financial and other matters.”
Investor Bahram Akradi filed a 13D on Northern Oil in 2016. He has continued to buy NOG, and as of Q3 2019 owned 8 million shares.
However, while major investors accumulate NOG and energy stocks in general look cheap, wholesale selling by institutional investors continues to weight on the sector.
Blackrock, the world’s largest money manager, just announced its “exiting investments that present a high sustainability-related risk.”
Two weeks ago, Blackrock Inc, the world’s largest money manager with $7 trillion under management, announced a fundamental reshaping of finance. BlackRock said it will begin to exit investments in coal production. The giant manager will also introduce funds that ban fossil-fuel stocks. It will aslo vote against corporate management that isn’t making progress on fighting climate change.
As Cramer sees it, the divestiture of oil stocks will continue as money managers seek to please investors concerned about climate change. “They’re tobacco. I think they’re tobacco. We’re starting to see divestment all over the world. You’re seeing divestiture by a lot of different funds. It’s going to be a parade. It’s going to be a parade that says, ’Look, these are tobacco and we’re not going to own them.”
Oil stocks are historically cheap vs the S&P 500.
However, the negative sentiment has left the oil sector historically cheap relative to other stocks. In 2011 the energy sector was trading at about the same level relative to book value as the broader market. Today, the gap is enormous: 1.5 times book for energy, 3.5 times for the S&P. And not all investors are shunning the sector. In addition to Bob Rowling, other billionaires, including Warren Buffett, Sam Zell, Jerry Jones and Carl Icahn have been accumulating stakes in oil companies.
So, as oil stocks get dumped by the money management crowd, it’s a good time to remember the words of the great John Templeton. “If you want to have better performance than the crowd, you must do things differently from the crowd.”
Contact Mark about investing based on SEC filings and smart money disclosures.
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