Latest / Bloomberg Intelligence / Caprock's Weatherley-White: Plotting for Post-Carbon Era(Audio)

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Caprock's Weatherley-White: Plotting for Post-Carbon Era(Audio) · Bloomberg Intelligence

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  Speaker 1: Global business news twenty four hours a day at Bloomberg
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  Speaker 1: This is a Bloomberg Business flag from Bloomberg World Handquarters.
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  Speaker 1: I'm Charlie Pellett. Amazon dot com posted first quarter sales
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  Speaker 1: and earnings the top to annle ass estimates, adding to
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  Speaker 1: heavily and endeavors like one hour delivery and marketing new
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  Speaker 1: lawer today Dow Jones Industrial Average capping the biggest drop
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  Speaker 1: in three weeks as Apple laded afternoon sell off in
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  Speaker 1: technology shares, overshadowing corporate deals and strong results from Facebook.
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  Speaker 1: Facebook today rallying seven point two percent, Apple slumping three
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  Speaker 1: point one percent. S and P five hundred index down
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  Speaker 1: nineteen points to two thousand seventy five, a drop of
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  Speaker 1: point nine percent down, Industrials down two hundred ten points,
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  Speaker 1: the decline of one point two percent. Nes Stack down
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  Speaker 1: up nineteen dollars now at twelve sixty nine ten, a
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  Speaker 1: five barrel crude Oil West Texas Intermediate up one point
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  Speaker 1: two percent. I'm Charlie Palaton. That's a Bloomberg business flash.
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  Speaker 1: You're listening to taking Stock with Kathleen Hay and Pimp
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  Speaker 1: Box on Bloomberg Radio. This is taking Stock on Bloomberg
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  Speaker 1: just to give you a little bit of a recap.
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  Speaker 1: Shares of Amazon higher by more than ten percent and
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  Speaker 1: after hours trading after the company reports first quarter results
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  Speaker 1: earnings per share of a dollar seven that handily beat
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  Speaker 1: the average analyst estimate of fifty seven cents. The company
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  Speaker 1: also posting sales that were better than analysts estimated, and
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  Speaker 1: also saying that the second quarter net sales will be
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  Speaker 1: between twenty eight and thirty and a half billion dollars
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  Speaker 1: as for the second quarter, and that is at the
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  Speaker 1: high end of analyst estimate. Stock moving high. Are also
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  Speaker 1: moving higher, and after ours trading, the shares a linked
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  Speaker 1: In are up by more than fourteen percent or earnings
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  Speaker 1: per share and revenue beat analysts estimates and also provided
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  Speaker 1: healthy sales guidance. Shares of LinkedIn higher right now by
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  Speaker 1: about fourteen percent, but on the other hand, shares of
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  Speaker 1: Gilead Sciences down by nine percent after reporting that profit
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  Speaker 1: missed analysts estimates and that sales of its blockbuster hepatitis
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  Speaker 1: C treatments were less than expected once again, Shares of
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  Speaker 1: Gilead Sciences down by nine percent. Well, how do you
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  Speaker 1: put together a portfolio or an investment strategy given the
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  Speaker 1: volatility in stock market performance? Let's find out from Matthew
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  Speaker 1: weatherly White. He is the managing director of the cap
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  Speaker 1: Rock Group to have over a billion dollars in assets
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  Speaker 1: under management. They are based in Boise, Idaho. He can
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  Speaker 1: be followed on Twitter at I three impact and he
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  Speaker 1: joins us in the studio. Matthew, thanks for being here. Yeah,
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  Speaker 1: thanks for inviting me on again. All right, so let's
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  Speaker 1: talk about your strategy. How do you approach the selection
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  Speaker 1: and allocation process for people that would come to you
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  Speaker 1: for advice? And so we start off with a really
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  Speaker 1: detailed lifetime discount of cash flow models. We get a
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  Speaker 1: clear sense of what our clients after tax inflation rate
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  Speaker 1: of return needs to be, and then we reverse engineer
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  Speaker 1: the asset allocation from that perspective. But what we're really
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  Speaker 1: interested right now in terms of portfolio construction and risk
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  Speaker 1: management it really the energy markets, because we think that
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  Speaker 1: the destabilization in the price of oil is instructive for
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  Speaker 1: us when we think about plotting a course to a
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  Speaker 1: post carbon or a carbon light global economy, and of
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  Speaker 1: course impact investment investing. It's not just how I can
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  Speaker 1: make money, but how can I make money and push
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  Speaker 1: the world, help the world move in the direction I want.
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  Speaker 1: When you say this disruption oil, just push the price
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  Speaker 1: so low creating the postcarbon area. Might say gas is
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  Speaker 1: so cheap, we'll never stop using oil. Yeah, it's counterintuitive,
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  Speaker 1: and I think that for the first time, certain me
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  Speaker 1: in my professional investing career, that relationship between the price
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  Speaker 1: of oil and the adoption of alternative energy strategies is
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  Speaker 1: starting to break down a little bit. And I think
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  Speaker 1: we might actually be seeing the emerging outline of the
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  Speaker 1: inverse of that, where the lower price of alternative renewable
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  Speaker 1: energy actually drives the price of conventional fuels. But this
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  Speaker 1: is not because of government subsidies. And I'm not the
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  Speaker 1: fossil fuel industry did not enjoy subsidies or does not currently.
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  Speaker 1: But I'm wondering, is that something that can stand on
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  Speaker 1: its own In places? Yes, in places no, I mean
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  Speaker 1: there are some states Arizona, for example, um X, the
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  Speaker 1: succession of the of the feeding tariff down there. Um
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  Speaker 1: solar power is almost at grid parity without any subsidies,
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  Speaker 1: but the five year extension of the investment tax credit
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  Speaker 1: sort of takes that conversation off the table. You might
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  Speaker 1: not like the subsidies, but they're going to be there
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  Speaker 1: for five mirrors, and that's a great tail wind to
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  Speaker 1: the continuing continued development of solar energy. So when you
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  Speaker 1: look at companies, who is on your radar screen because
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  Speaker 1: you're talking about alternative energy, you're talking about a postcarbon era.
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  Speaker 1: You're talking about the role of technology, which what does
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  Speaker 1: incrude oil too? But it plays such a big role
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  Speaker 1: in all these alternative sources. It's such a big part
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  Speaker 1: of it. I think a lot of times when people
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  Speaker 1: look at alternative and renewable energies, they think about it
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  Speaker 1: as an energy play. We think about it as a
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  Speaker 1: technology play. The reason being that traditional energy is a
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  Speaker 1: commodity based business and increased utilization broadly speaking, leads to
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  Speaker 1: higher prices. With alternative and renewable energy, it's exact opposite.
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  Speaker 1: Increased utilization leads to lower consumer prices per unit of
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  Speaker 1: energy created. And if I'm a consumer, and I get
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  Speaker 1: to choose. I'm going for more use equals lower prices.
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  Speaker 1: Pals us about emerging markets if you can, because they
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  Speaker 1: sometimes have the ability to leap frog developed countries in
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  Speaker 1: their technological application and also in the environmental industry. That's
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  Speaker 1: exactly right. We've made some really interesting investments in distributed
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  Speaker 1: power in subs in Africa for precisely that reason. If
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  Speaker 1: you use the analog of the mobile phone and you
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  Speaker 1: look at Sub Saharan Africa in particular, they were able
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  Speaker 1: to effectively create a communications network without any hard lines installed.
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  Speaker 1: We think it's the same thing with solar power. If
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  Speaker 1: you skip the whole grid installation process and the hundreds
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  Speaker 1: of billions of dollars necessary to build power lines across
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  Speaker 1: the desert, then all of a sudden you have the
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  Speaker 1: capacity to bring power, electricity light to communities that heretofore
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  Speaker 1: have simply been off the grid. So can you give
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  Speaker 1: us a couple of names of attractive renewable energy companies? Uh? Yeah,
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  Speaker 1: I mean you might know that I'm not permitted to
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  Speaker 1: recommend specific stocks are but you're not recommending them, But
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  Speaker 1: you who are who are leaders in this field? Yeah,
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  Speaker 1: so I'm even looking at ones like Solar City or
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  Speaker 1: sun Edison which are cracking sun EDISD in particular, cracking
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  Speaker 1: under the weight of debt. We think that the business
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  Speaker 1: model still makes sense. It was just the business management
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  Speaker 1: got a little bit out of control. Too much debt
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  Speaker 1: growing too fast. Pretty traditional story in the markets, and
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  Speaker 1: what kind of returns can I get if I hop
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  Speaker 1: into this area? What are you what are you thinking? Yeah, so,
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  Speaker 1: if you're doing an alternative renewable project energy finance typically
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  Speaker 1: through debt, you can look at an eight handle on
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  Speaker 1: a lot of that debt um If you're doing equity,
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  Speaker 1: you're really taking a ride on what's going to come
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  Speaker 1: from the Paris Accord and Top twenty one. If a
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  Speaker 1: carbon pricing mechanism emerges, we expect very attractive returns. If
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  Speaker 1: it doesn't in the near term, then there's gonna be
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  Speaker 1: a lot of alatility. Is a transition from a carbon
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  Speaker 1: intensive economy to something different. This is great news for
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  Speaker 1: people who want to help push the renewal, editwable and
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  Speaker 1: renewable energy front forward and makes the money. Matthew weatherly White,
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  Speaker 1: thank you for joining us. Managing Director the cap Rock Group,
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  Speaker 1: thank you for joining us. Day on taking Stock. I'm
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  Speaker 1: Kathleen he has along with Pim Fox, and this is
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