What We Do
What drives us is to find attractive equity and commodity investments opportunities in the energy, mining and renewable sectors. Palissy’s team differentiate itself by constantly following-up on these ideas through a tailored interaction with its clients.
Palissy Advisors’ experienced team capitalises on its deep understanding of global energy and mining industries to provide clients with differentiated macro, commodities and equity analysis. The top-down/industry part of Palissy Advisors’ research enables the team to extract broad thematic views we suggest to express in a portfolio.
The process is then essentially investment idea driven, instead of doing classic maintenance research on an investment universe. The major part of Palissy product is therefore equity research, which is achieved through a detailed and granular stock selection process that aims at populating the themes extracted from our industry analysis.
All our clients are very different in nature (sovereign wealth funds, hedge funds, pension funds, commodity trading houses), investment styles (long short equity, macro, event driven, credit, long only) and investment horizons (3 months to 5 years). We find it very enriching that they constantly feed the loop with interesting inputs.
This investment process has been proven very effective and the long term track record is robust.
Stock Selection Process
Through a deep understanding of global energy markets and mining commodities, Palissy is able to provide differentiated macro and industry analysis. This part of the process can be executed thanks to sector expertise built over previous decades, proprietary databases, an extensive industry network and our constant interactions with energy and mining management teams. The goal of the top-down/industry of Palissy Advisors’ research is to extract large thematic views we suggest to express in a portfolio.
From there, Palissy’s aim is to perform a detailed bottom-up analysis to populate these themes with under-valued stocks in which to invest over a 6 to 18 months’ time horizon. This process is done through regular meetings and calls with energy and mining managements. The top-down and bottom-up parts of Palissy Advisors’ research are very complementary but all the modelling on equity investments in the energy, mining and renewables sectors in North America and Europe is done without incorporating the team’s macro views i.e. on spot and forward prices.
Palissy looks for a string of catalysts ahead to unlock the value on the stock and enable the theme to play out.
This investment process has been proven very effective and the track record is excellent. Most importantly, this robust set-up enables us to quickly adjust our views when one of our recommendation on a single name or commodity is not right.
Examples of Investment Ideas
In June 2016, Palissy worked on the US pressure pumping effective utilization rate and full cycle break evens of US lower 48 producers. This analysis combined with a detailed oil supply and demand work, helped the team to forecast an oil bounce to $85 in 18 months. Oil hit $87 in two years.
Early 2016, Palissy coupled a macro work on China, showing that the combined aggressive fiscal and monetary stimulus had succeeded in derailing the deflation spiral, and a detail bottom-up work on miners showing their potential to delever their balance sheet, sustain and increase cash returns to shareholders. Palissy work on the valuation of Glencore’s partial infrastructure and marketing agriculture division sale process enabled investors to make 4 times their money. Palissy moved to a sell on miners shortly before the announcement of the break-down of China-US trade talks during the spring 2019.
Saudi Aramco Independent Valuation report
Ahead of the IPO of the largest energy company in the world, the team of analyst published an independent valuation report. Palissy Advisors came out with a $1tn valuation mark that was 50% below the low of the range of the 40 banks members of the syndicate so paid by the seller. Palissy was then the only energy research firm to provide its clients with an independent valuation deck and a proprietary model. This shows the added value of high quality independent research for clients and a perfect example of how it differentiates itself from maintenance bank research.
Palissy Advisors sees crude quality issues, L48 drilling inventory exhaustion, misplaced concerns on demand peaking next decade as the major energy investments themes over the next two years and beyond. Over the recent years E.S.G. strategies developed in Europe have mostly been exclusion investing. We believe that E.S.G is now evolving towards impact investing and therefore expect the large integrated to be at the core of the investments in energy transitions decided by asset managers and pension funds.
- Access to Palissy macro and commodity research
- Access to Palissy Advisors’ industry research and major investment themes driving investments in the Energy, mining and renewables sectors
- Access to Palissy equity reports and proprietary modeling
- Access to proprietary industry data
- Interactions with the team on major industry themes and follow-up on single names investment ideas.
- Work-shops on major Energy transition issues.
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