L. Porayko

March 2013

“The value of experience is not in seeing much, but in seeing wisely.”

The Golden Rule is….

Don’t Lose

Money

3 Value Themes

Serial Compounding Machines

Event Driven Special Situations

Cigar Butts

3 Pillars

Management

Moat

Mispricing

Mitigants: kill the idea

This is what a compounding machine looks like.

NOV: great company hated sector

Look familiar?

Mgmt

VisionAllocationExecutionProbity

Moat

‘No Other Vendor’EOS (60% M/S)

‘Sticky’ ContractsROIC>25%

Moat cont’d

o⏏Economic rents

oSupply chain

oIndustry standard

oBargaining power

Mispriced

Opportunity vs. valuation dislocation

Mispriced

What are the normalized earnings?

Mispriced

Shouldn’t it trade at a premium vs. peers?

Mispricing

EPV $7.40/share

x Historical P/Elow 13.5x = $99.90/share

x Historical P/Ehigh 18.5x = $136/share

Discount by WACC 8.4% to mid 2014

Low $99.9/(1.084)1.5 = $88.52/share

High $136/(1.084)1.5 = $120.50/share

MOS = 29%-77% current share price

Mitigants

Cameron-SLB JV threat

Commodity

Disruption risk

Key-man risk

SKUL: a fallen angel left for dead

Mgmt Founder Activists Buy-back 16%

Moat De minimis

Mispriced P/E 6x vs. comp 23x

SPE:activist on sale?

Mgmt

•Track-record

•1% MER

•Insider buying

•DividendsMoat

•Small pondsMispriced

•12% < NAV

DRA CRT Acquisition Corp Preferred Stock DCAQP

Mgmt‘Sterling’ ICPMOwn 58%

MispricedOver-collateralized 5x IRR 20%