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Where to invest in Oil ... after it bottoms, of course
Interesting chart for gas prices from 1929 to 2013 normalized in 2013 dollars. I started driving at 16 in 1970 and from the chart, .35 is exactly the price I remember filling my dad's car with, That would be $1.63 in today's dollars... ok, not quite filling. I think I put a gallon or two in the tank... once in a while.
Again: the Saudi's can shut down our shale and marginally more-expensive production only as long as they keep their price below our production cost which seems to be somewhere in the $40-50 range. Let's stipulate that we're all geniuses and buy in reasonably close to the bottom. Then what? How does this great price recovery happen so we all get rich?
Don't know if bottom or not. Living in Texas you definitely see a plateau in housing prices and friends neighbors getting laid off jobs. Not many new jobs oil industry. Not like 1982 a over again but could be beginning. Bought bunch of oil bonds since last yr and you do see a declines in prices. Hope we don't get major recession or all bets are off
@Old_Joe CVX is yielding 4.5% and XOM is yielding almost 4%. I won't get rich, but I think these two companies have the financial resources to protect those dividends. If they keep sliding, I'm planning to buy more. No, they are not the most exciting positions from a risk/reward standpoint, but I'd rather have a "safe" dividend than roll the dice on a capital gain.
Which MLPs are best positioned to weather this downturn and protect their dividends? Any recommendations? I'd like to start buying those, as well, but since some of the stalwarts...like Kinder Morgan...have been decimated, I don't know where to start.
@Mark Thanks! How about AMJ or AMLP....still prefer EPD and MMP? AMJ is trading at a slight discount to NAV. EDIT: Why the huge ER on AMLP? according to Schwab, it's over 5%!!!
Bought bunch of oil bonds since last yr and you do see a declines in prices.
Is there such a thing as oil preferred shares? A stock beat up by the market that still has the ability to "weather the storm" and continues to pay a dividend (has low debt/ relatively high revenue) might even be better than a preferred share.
I second @little5bee recent quote: "CVX is yielding 4.5% and XOM is yielding almost 4%. I won't get rich, but I think these two companies have the financial resources to protect those dividends. If they keep sliding, I'm planning to buy more. No, they are not the most exciting positions from a risk/reward standpoint, but I'd rather have a "safe" dividend than roll the dice on a capital gain."
@little5bee - if you're looking for a 'safe' dividend you're best shot at that is with both EPD and MMP. They have the coverage in spades via cash flow from operations with no need to access the market for additional capital. They both have also been so beaten down along with the rest of the sector that the potential for capitals gains are there as well and as the best of the breed I would expect them to have the most support.
AMJ and AMPL by design or necessity are exposed to the risks of dividend reductions and realignment if energy continues to get hammered and more MLP's become "Kinderized", go belly up or just eliminate their current divy's in an attempt to stay afloat. I've considered AMLP but I am content to wait for MR. Price to show the way forward. See here for one persons slant on AMLP's er: http://investwithanedge.com/alerian-mlp-etf-amlp-finally-admits-its-8-expense-ratio
Fair disclosure - I own EPD and MMP and have for quite some time. I'm green on both but I was much greener earlier in the year. I'm underwater on KMI and working toward selling out without giving it away. Since it's in a Roth there are no tax advantages to be had but I don't expect the company to go bankrupt.
Comments
Interesting chart for gas prices from 1929 to 2013 normalized in 2013 dollars. I started driving at 16 in 1970 and from the chart, .35 is exactly the price I remember filling my dad's car with, That would be $1.63 in today's dollars... ok, not quite filling. I think I put a gallon or two in the tank... once in a while.
Which MLPs are best positioned to weather this downturn and protect their dividends? Any recommendations? I'd like to start buying those, as well, but since some of the stalwarts...like Kinder Morgan...have been decimated, I don't know where to start.
EDIT: Why the huge ER on AMLP? according to Schwab, it's over 5%!!!
I second @little5bee recent quote:
"CVX is yielding 4.5% and XOM is yielding almost 4%. I won't get rich, but I think these two companies have the financial resources to protect those dividends. If they keep sliding, I'm planning to buy more. No, they are not the most exciting positions from a risk/reward standpoint, but I'd rather have a "safe" dividend than roll the dice on a capital gain."
AMJ and AMPL by design or necessity are exposed to the risks of dividend reductions and realignment if energy continues to get hammered and more MLP's become "Kinderized", go belly up or just eliminate their current divy's in an attempt to stay afloat. I've considered AMLP but I am content to wait for MR. Price to show the way forward. See here for one persons slant on AMLP's er:
http://investwithanedge.com/alerian-mlp-etf-amlp-finally-admits-its-8-expense-ratio
Fair disclosure - I own EPD and MMP and have for quite some time. I'm green on both but I was much greener earlier in the year. I'm underwater on KMI and working toward selling out without giving it away. Since it's in a Roth there are no tax advantages to be had but I don't expect the company to go bankrupt.