Longhorn Investment Team Weekly Insight: The Texas Two Step (Part Two)

YEEEEeeeeeeeEEEEEE! Welcome back to the LIT Texas Two Step: Part Two. In this edition, we’re taking a tour across Texas… or the relevant parts anyway.

Brent: 65.05 (+.86%)

WTI: 58.87 (+.1.80%)

No, Brent is not a Kappa Sig. Brent and WTI refer to the two most popular grades of oil, which are commonly used to quote oil prices.

So, what’s the difference? WTI (or West Texas Intermediate) refers to the price of North American oil, while Brent represents African, European, and Middle Eastern prices.

Why are the prices different? All else equal, WTI is about $2 to $4 more than Brent because of its lower sulfur content – that’s the quality spread. But the prices can also fluctuate due to political events, which is why Brent is more expensive right now. Because of rising tensions between the US and Iran, oil in the middle east is seen as less secure, and Brent prices rose relative to WTI as a result. India just promised to increase oil production to increase supply in the Middle East and stabilize Brent prices. Thanks India!

Now that you’ve met oil, we’ll introduce you to her boyfriend, Houston.

HOUSTON (Magnolia City):

Notable HQs: Phillips 66, Sysco, Haliburton, Waste Management Inc, AstroFest

Business News: Kicking things off with a tragedy, the beloved local retailer, Southern Importers, is shutting down after 104 years of selling party supplies and holiday decorations. I know what you’re thinking – what could possibly have gone wrong? To make a 104-year story short, the internet happened.

While most big box retailers have kept up with the explosion of e-commerce by becoming omnichannel, the retail apocalypse is still no joke for local businesses that don’t have the capital to adapt to such disruptions. But hey, everything is 40% there this week so take advantage!

Houston midstream player, Archrock Inc., just inked a $410 Million buyout of Elite Compression Services LLC to increase their stake in the Permian Basin. This acquisition is nothing compared to the multi-billion-dollar buyouts of Anadarko, but it is important to look at in the context of the broader liquid natural gas (LNG) market.

LNG demand is skyrocketing due to China’s transition away from coal and transitions in Eastern Europe’s natural gas grid. Take that with the ridiculous supply of natural gas in the Permian, and you see way higher demand for natural gas shipping companies – something both Archrock and Elite Compression Services specialize in.

We can’t end Houston without mentioning some cuisine related blurb so here it is: Gabe and Sam are opening five different delivery-only restaurants in Houston. Let us know in the comments what you think about such a concept (estimated food delivery CAGR=32% till 2021).

Fun Fact: More people eat out in Houston than any other city in America!

AUSTIN (Bat City):

Notable HQs: Dell, Chuys, Whole Foods, Longhorn Investment Team

Business News:

CONTROVERSY! The Austin City Council passed a law that allows homeless people to loiter in the city as long as they don’t act aggressive. In other words, homeless people can hangout wherever without the police making them go stand somewhere else. Some people say that this will be terrible for the economic community because it could reduce tourism or lower property values. Others argue that the government shouldn’t criminalize people for having nowhere to stay. Leave your hot take in the comments.

Bad News: Rents for single-family homes in Austin are hitting new highs (+3.5% yoy). As a result, many potential buyers and even tenants are being priced out of the housing market. Austin is no stranger to gentrification. I mean just look at the place.

Good News: Unemployment is at its lowest level in 20 years in the 512 thanks to the continuing influx of high-tech yuppies. Facebook and Apple’s new offices in the area are just some of the high-profile examples. Even the vape unicorn, Juul Labs, is moving its operations to ATX. Brent from Kappa Sig just got hired on as their new product tester.

Fun Fact (from someone else’s travel blog): “During football games at the stadium, UT-Austin fans display the Hook ’em Horns hand sign.”


Notable HQs: AT&T, American Airlines, Southwest Airlines Exxon Mobile, McKesson

Business News:

We’ll open with highlights from new reports from the Dallas FED. They find that Texas is not immune to the prolonged trade war, as retail sales slowed in June, but unemployment is low and the service sector as a whole has performed well over the past couple months. Roughly 40% of manufacturers reported poor outlooks due to trade uncertainty.

Dallas airports just keep flying higher, as the government just invested millions into new taxiways in Love Field and the DFW airport. Alliance, the all-cargo airport in DFW is in the midst of a $260 Million renovation that will help companies like FedEx and Amazon fulfil orders quicker.

A recent study by Emory University found that the Dallas Cowboys have the best fans of any sports team ever. Case closed.

Fun Fact: Dallas is home to the first ever microchip and the frozen margarita machine.