Tuesday, March 28

Crude oil prices surged today on news from Libya of a Force Majeure closing of a pipeline responsible for moving 20% of that country’s production to export facilities. Early speculative consensus pins the blame on armed conflict in the region of the pipe, making it very unclear when (if ever) this pipeline could be brought back online.

As such, oil industry stocks spiked this morning – spoiling our plan yesterday to acquire Anadarko Petroleum (APC) at 59.50. With the price edging on 62.00 we do not plan on taking any further attempts at this position. Our price target remains at 72.00, but the current upside potential no longer seems worth the long term capital tie-up and potential downside risk.

We also entertained the possibility of acquiring RigNet (RNET) instead of Anadarko – logically they stand to benefit from the same scenarios as direct oil players. Many reputable analysts hold RNET as a strong buy, but moderate insider selling today (two VPs, one SVP, and the CFO) coupled with a strongly negative outlook for the oil equipment space indicates that RNET can only be held as a very short term position, and insider activity suggests that the window for such a position may have already closed. In the end we failed to find any confident basis for any position in RNET.

The only other development today regards DLB. Dolby Laboratories is again approaching our target price, so we will look to close sometime in the next week.

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