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Barron's interview this weekend was with John Buckingham [subscription], portfolio manager with the Al Frank Fund and a long-time believer in investing in low-priced, out-of-favor stocks.Two stocks to focus on from the interview are Rowan Companies Inc (NYSE: RDC) and Tsakos Energy Navigation Limited (NYSE: TNP). Many energy stocks have consolidated during the past year and rallied nicely since the beginning of 2007. The big issues with small- to mid-cap energy stocks in the energy sector are that they have been printing money and are under-leveraged. Many top energy company executives entered the business in the boom period of the late seventies, only to see their businesses completely collapse for some 20 years. The industry really did not begin an upswing until the early part of this decade.
This fear derived from 20 tough years has led to very conservative balance sheet management. However, this could possibly begin to change. With enormous cash flows and oil and natural gas prices meaningfully above the cost to get out of ground, these companies can lock in a lot of profit by signing long-term contracts. This could provide some of these companies the opportunity to issue some big dividends or be acquired by private equity. Rowan and Tsakos are two companies that fall into this camp.
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