Nate Abercrombie – Invest with Good Management Teams

Nate Abercrombie lived in Syria for two years trying to learn Arabic before attending graduate school. He had hoped the language skills would help him secure a job in the oil and gas industry. Ironically, he ended up working in the renewable energy industry as a financial analyst. He loved having the opportunity to analyze and research large capital projects, but financial analysis in the wind energy business can become very repetitive. He needed a new challenge and equity research was something that he really wanted to do. Nate got a shot at Janus Capital Group (now Janus Henderson Group). It was a phenomenal learning experience and he got to know some great investors. However, Nate ultimately came to realize that the corporate objectives were misaligned with fund-holder returns, so he started thinking about next steps for himself. Something he did really enjoy about the equity research process was meeting management teams. Considering that the average investor never has the chance to listen to management, Nate decided to start the podcast, Investing with the Buyside, which has now become The Stock Podcast, which is described as: “The only investing podcast that gives everyone the chance to hear fireside chats with public company CEOs and CFOs regarding their business, industry, and financial outlook.”   “In autumn 2018, the company decided it would cut its distribution (dividend payout) by 67% … the stock went down something like 45%. So when I bought in, it was probably at around US$10/share, and it declined to about $5/share. But then over the next few days it just kept going down.” Nate Abercrombie   Worst investment ever  And still in progress  Nate said he has made a couple of bad investment missteps, but the one he spoke of was one that remains in play as he still owns some of the shares in the company he talked about. As an energy industry financial analyst, he covered the midstream space (“Midstream” is a term used to describe one of the three stages of oil-and-gas industry operations, and delineate the processing, storing, transport, and marketing of oil, natural gas and natural gas liquids). One of the things he did as an investor was that he could invest outside of the portfolios he was managing, but also invest in some of the stocks that he was not covering, but were within his sector.   Experienced oil and gas analyst makes a play at a midstream outfit  He was a big investor in exchange traded funds (ETFs), because it was very difficult to trade in and out of individual equities back then. Also, he had been cleared to invest in a couple of midstream stocks on an individual basis, and one in particular was Sanchez Midstream (SNMP:US, SNMP.K), a subsidiary of Sanchez Energy (SN.US), an oil and gas exploration and production company in the United States. These companies pay a lot of their profits out to investors, but in this industry, rather than call them “dividends”, they call them “distributions”. The distributions that they were paying out at the time were very attractive, some in the double digits, and Sanchez Midstream was no exception.   Idea was to use dividends as income while getting podcast off the ground  Nate had been exploring what was going to come next for his...