| The Mitchell Group’s investment process consists of two provinces: 1) Analysis of energy market
dynamics, and 2) Basic financial research applied to specific securities. |
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| The initial exercise, a top down study of energy supply and demand variables, is designed to
provide a long-term B.T.U. framework. The development of such a model includes recasting numerous
data collection systems, examination of energy consumption on a nation by nation basis, scrutinizing
production and reserves in each petroleum nation, and accumulation of detailed knowledge concerning various
national energy policies, capabilities and objectives. |
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| Our investment process also includes a sector weighting and allocation within the various
energy sub-sectors that is driven by long-term supply/demand analysis and price forecasts. Stocks are
selected based on their market value versus a bottom-up derived intrinsic value of the company’s assets
and liabilities. This is a proprietary process based on long experience and judgment. |
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| The Mitchell Group’s proprietary analysis draws numerous comparisons between peer companies
within the energy industry. For example, exploration and production companies are run through a hurdle
program, which includes the asset value of existing reserves, reserve replacement capability, cash flow
adequacy, financial strength, and current dividend yield. |
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| If these screens indicate a stock is undervalued both in the absolute and relative to its peer group,
then more difficult subjective work is undertaken. |
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| Our investment focus always remains upon long-term values; identify unrecognized assets, purchase
at a bargain, and await the market discovery of our evaluation. |
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