Buy when a Lynch Mob is About to Hang Them From the Lamp Post

You know my preference for buying country funds when there is blood in the streets.
The corporate equivalent of that maxim has to be to buy when a lynch mob is about to hang them from the lamp post.

That certainly is the case with Transocean (RIG), which is catching all the blame for the Gulf oil spill. But a few energy hedge fund managers I know have been going through the company's contract with British Petroleum (BP) with a fine tooth comb, and it turns out that the latter agreed to indemnify RIG for any accidents, including spills.

Unless BP can prove deliberate fraud or negligence, the cost of the entire disaster is going to come out of its pocket.

I know the management of RIG fairly well, as I once negotiated to participate as a partner in another offshore project. In the end, I didn't go ahead because the $10 million minimum bite was more than I was willing to lay out.

But you'll never find a finer and more professional team in the oil patch. The company has a net asset value of $106/ share, which makes its current price of $52 a once in a life time steal.

It has a $28 billion order backlog to tap offshore fields in places like Brazil, which will generate $10 billion of free cash flow over the next three years.

Buy at first news of a successful capping of the underwater well. How will you know when this is happening? Just click here for the link for live video taken by  BP's remotely operated video at 5,000 feet down in the Gulf. Don't you just love the Internet?

Article courtesy of: The Mad Hedge Fund Trader