Ariel's Charles Bobrinskoy: APA is very well positioned for increased demand in natural gas

Summary

• Macro Inflation & Sentiment: Argues real wage gains are being eroded by inflation, leading to negative public sentiment, despite positive real wages at the upper end and minimum wage increases.
• Primary Investment Thesis: Bullish on APA Corporation (formerly Apache) as a key holding, citing extreme undervaluation (trading at ~5x P/E and 2.5x EBITDA) and positioning for rising natural gas demand.
• Natural Gas Demand Driver: Believes U.S. electricity demand, particularly from data centers, will be met primarily by natural gas due to insufficient wind and solar capacity in the near term.
• Market Structure & Risk: Notes the oil market is in backwardation, meaning futures prices are lower than spot prices, which the market interprets as a negative signal but he views as a potential positive for stocks like APA.
• Geopolitical Risk Acknowledged: Implicitly addresses risk by stating the market has already priced in negative geopolitical events (e.g., potential Iran cease-fire).
• Market Divergence: Highlights a split market where large-cap growth stocks in the S&P 500 became "grossly overvalued," while value stocks like energy became extremely cheap. His value portfolio is up ~7% this year against a down market.
• Fed Limitations: Contends current inflation is driven by a "cacophony" of policies (tariffs, fiscal deficits, deglobalization, reduced immigration), limiting the Federal Reserve's power to change inflationary expectations in the short term (next six months).
• Investment Philosophy: Advocates for value investing over broad index funds, which he says are "no longer a safe place to be" after last year's overvaluation.