Greece wouldn't want to borrow from the markets at current rates (or even the rates that prevailed last week) and share prices rise and fall. Neither sell-off is an immediate problem. Graham and Dodd investors bought into these stocks with a substantial margin of safety. Though the subsequent oil price rise made these stocks home runs, the key point is that the investments weren’t dependent on the oil price. Investors were getting the assets at a huge discount. Yet its stock was trading for only $1 billion.
Patterson-UTI Energy owned some 350 rigs worth about $2.8 billion. Ensco International was trading at less than $15 per share, while the replacement value of its rigs was estimated at $35. But because the industry was depressed, drilling companies were selling for less than the value of their equipment. Graham and Dodd would not have advised speculating on the price of oil-which is dependent on myriad uncertain factors from OPEC to the growth rate of China’s economy to the weather. In 2001, for instance, energy stocks were cheap (as was the price of oil). The competition for such values is fiercer in the United States, but they can be found, especially, again, when some broader trend punishes an entire sector of the market.
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