Friday, November 23, 2007

Bookkeeping: Temporarily Closing out GlobalSantaFe (GSF) Position

It appears the pending merger of Transocean (RIG) and GlobalSantaFe (GSF) is set to officially happen next Tuesday. I am going to close the last of my GlobalSantaFe position simply due to 'book keeping' issues with the account. Since there is a cash payout involved and some not so usual merger mechanisms in this transaction I am just going to step aside for now, and will rebuy the combined company which will simply be the new Transocean, in the future. The deep sea oil drillers have been a mixed bag for the fund so far, and I've held GlobalSantaFe since Sept 4, 2007 - only booking about a 4% gain in the name. I still like the group but if we do get this global slowdown we could have a perception is reality drop in crude prices which would (unfairly) hit the energy stocks - again, crude at $60, $80 or $100 won't change the need for the deep sea oil drillers - Petrobras' (PBR) recent major discovery was in water 4.5 miles deep in which there are only 40 rigs in the world that could perform such a service. So I continue to like this group for the long run as new discoveries are going to be needed in harder and harder to reach areas.

Again this move has nothing to do with fundamentals (which I like) or technicals (which actually look very good for both these names) - simply to avoid any headache with the tracking mechanism of the fund with this merger. The combined company is going to be a huge gorilla in this space.

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