Value Investing Stocks Quadrant December 2025

Key Concepts

Value Investing Risk and Reward Quadrant
Low Risk, High Reward Investing
Dividend Yield
Capital Expenditure (CapEx)
Free Cash Flow (FCF)
Earnings Per Share (EPS)
Cyclical Stocks
Oil Prices and Sensitivity
Taxation (Norwegian)
Shareholder Yield
Market Sentiment
Long-Term Wealth Compounding

Value Investing Risk and Reward Quadrant Update

The video updates the value investing risk and reward quadrant, which plots companies based on reward (low to high) on the x-axis and risk (low to high) on the y-axis. The primary objective is to identify companies that offer low risk and high reward, while avoiding highly risky investments.

Oil Sector Investments

The discussion focuses on several oil-related companies, analyzing their potential within the current market environment.

Aker (Norwegian Oil Play)

Portfolio Allocation: Represents 2% of the model portfolio.
Business: Norwegian oil drilling company with significant oil field ownership.
Key Strengths:
- Lowest Capital Expenditure (CapEx) and operating costs in the sector.
- Projected production growth of 20%.
- Generates substantial cash flows irrespective of oil prices, estimated at 5 billion at low prices, 10 billion at $40/barrel, and 15 billion at $65/barrel.
Valuation: Trades at a Price-to-Earnings (P/E) ratio of one on market cap.
Challenges:
- High Norwegian taxes, with 71% of profits paid in taxes for the quarter.
- Sensitivity to oil prices, though low costs and high profit margins (40% before taxes at $60/barrel oil) provide a buffer. Net profit only slightly decreases even with lower oil prices as tax payments also reduce.
- Dividend is maintained as long as oil prices are above $45.
Market Outlook: Current oil prices are below $60/barrel for 2025, with expectations of further decline due to oversupply. This could lead to lower stock prices for oil companies.
Geopolitical Impact: Geopolitical events or OPEC cuts could rapidly shift oil prices, significantly altering the investment picture.
Accidental Sensitivity: Accidental, for instance, does not generate cash flows at $50/barrel but does significantly at $80/barrel.
Investment Strategy: Starting with a small allocation (2%) and increasing it as understanding and conviction grow.

Petrobras (Petror)

Dividend Yield: 10% dividend yield.
Consideration: Norwegian taxes need to be factored in to determine the actual net yield.

Accidental

Dividend Yield: 2% yield.
Strategy: Aims to lower the dividend yield initially, then potentially increase it and implement buybacks with higher oil prices (around $80/barrel).
Cash Flow Sensitivity: Generates $265 million per $1 change in oil price.
Impact of Price Drop: A $10 drop in oil prices could reduce free cash flows from $5 billion to $2 billion in the next 12 months.
Stock Performance: Stock price has already declined by 30-40% reflecting this sensitivity.
Debt Repayment: The company plans to repay debt.
Oxycam Sale: Sold Oxycam to Warren Buffett for over $800 million, which was a profitable investment.
Volatility: Companies with higher production costs experience greater stock price volatility. Accidental could double if oil reaches $100/barrel.

Other Stock Discussions

Flower Foods

Recent Discussion: Discussed 5 days prior to the video.
Key Concern: Potential dividend cut that may not be fully priced into the stock.
Status: Still under observation; not currently owned by the speaker.

CNH Industrial

Investment Pick: David Einhorn's pick.
Current Situation: Stock is significantly down due to a lack of expected recovery in Latin American demand for agricultural equipment.
Profitability: Likely not profitable at the moment.
Cyclical Nature: This is a cyclical play. When farmers increase equipment purchases, profits, cash flows, dividends, and buybacks are expected to rise, potentially leading to 15-100%+ upside.
Valuation: Currently appears cheap, but could decline another 30%, increasing future upside.

Furrerf

Recent Discussion: Discussed recently with no significant new developments.
Future Outlook: Performance hinges on the next earnings report. Growth will drive the stock up; further issues will cause it to decline.
Predictability: Difficult to predict, even for long-term analysts.
Long-Term Perspective: Valuation suggests a positive long-term outcome within a diversified portfolio.

Domino's Pizza

Interest: Domino's Pizza Group was previously considered interesting due to a high dividend yield.
Recent Performance: Stock continues to decline.
Negative News: CEO departure after two years, and a planned second brand acquisition was deemed a bad move 3 months ago.
Valuation: Can be valued on Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA). Estimated at 10 times EBITDA, leading to a market cap of $700 billion after debt deduction, suggesting potential for a private takeout.
Concerns: Introduction of unconventional pizzas (gunpowder chicken, masala paneer) is questioned.
Potential Upside: Any growth and the ability to maintain the dividend could make it interesting. Lower stock prices might allow for a cheaper acquisition.

Green Brick Partners

Previous Discussion: Discussed in previous videos and by "Vagans Babriant."
Reason for Removal: Speaker is not a specialist in US homebuilders and does not plan to become one. While it appears cheap with reinvestment in land, the speaker lacks conviction.

Amsterdam Commodities

Reason for Removal: Niche and too small for online discussion, especially now that Aker is owned on the research platform.

Bar

Reason for Removal: Closure of the fund due to the manager's unwillingness to deal with such matters.

Pabry Wagons

Recent Discussion: Discussed in a video the previous day.
Value Proposition: Expected to be positive.

HPQ (Hewlett-Packard)

Business: Described as a "slow and steady compounder" with good dividend yield.
Financials: Recent earnings show good cash flows, EPS, and revenue growth.
Valuation: $3 billion in free cash flow compared to market cap is positive. Debt is manageable.
Outlook: Projected $2.8 billion in cash flows suggests a double-digit free cash flow yield.
Stock Performance: Stock is down due to market sentiment and concerns about increased chip and memory prices.
Potential Catalysts: AI could drive demand for more powerful computers.
Risk/Reward: Risk is higher and return is lower compared to a few months ago.

Nomad Foods

Earnings: Not great earnings, discussed last month.

Dow Chemical

Dividend: Continues to pay a good dividend.
Stock Performance: Stock appears to have stopped declining.
Sector Outlook: Uncertainty about when the chemical sector will rebound.

Other Companies Mentioned Briefly

Amazon, Google: Great businesses.
Warrior: Discussed with Fabri.
Verizon: Always there.
Schwab, Nike: Nothing new.
S&P 500: To be discussed tomorrow, projected 1.9% shareholder yield, questionable growth.

Investment Strategy and Market Environment

Current Market: The speaker describes the current market as having "emptiness," with Michael Burry predicting a few bad years for the stock market.
Pillars of Value: Investors can find "pillars of value" by focusing on investments that offer around 10% returns over time, aligning with personal preferences and learning goals.
Portfolio Management: The speaker's own portfolio management involves research and minor adjustments, with significant changes only occurring if the market shifts dramatically.
Personal Approach: The speaker is more of a "hedged of a type of guy," but this is difficult to discuss in detail on YouTube.
Actionable Insight: The video highlights 5-6 potential buys that investors might consider for their portfolios, emphasizing the need to understand cycles, risk, and reward.
Long-Term Compounding: Reinvesting dividends and compounding over time is presented as a strategy for long-term wealth creation.

Conclusion

The video provides an update on the value investing risk and reward quadrant, analyzing several companies, particularly in the oil sector, and discussing their current valuations, risks, and potential. The speaker emphasizes the importance of understanding market cycles, individual company fundamentals, and personal investment goals. While acknowledging current market uncertainties, the video suggests that opportunities for value investing still exist for those willing to conduct thorough research and adopt a long-term perspective.