I haven't had much luck investing in E&P. I do hold some stocks that have been beaten down such as OAS and MPO. I don't know how to evaluate them very effectively because things are so volatile, but I thought I'd buy a little just on the off chance that things would turn around. Like I said, I don't own very much - it's more of a batting for the fences type strategy. (I figuire these companies will either go bankrupt or have a dramatic turn-around.) My main holdings are in refining. I am particularly enamored with ALDW, NTI, and I've been thinking about buying CVRR. I also think HFC, VLO, and WNR are good buys, but I don't think they have quite the same potential as the former 3 because it appears that ALDW, NTI, and CVRR are undervalued a bit more. I haven't really loooked at pipelines much, except I do keep tabs on Marathon, but I don't own any at the present time.
I'm not complaining, but I checked my stocks today and found all of them down significantly, but this one. It just seems odd. Is there a reason, or is it just one of those quirks of nature? Who knows? However, I am glad that this is my major holding at this point.
I would probably agree with you for the most part. However, I think they are all screaming buys if they were compared with the rest of the stock market. In fact, all three are above the average return for the refining industry itself. I don't know why refining is chronically undervalued, but my theory is that people believe that there is disruptive technology that will take the whole industry down. I think most people are living in a fantasy world, but that is a whole other story.
I do believe that a large part of the investment sector is betting that some disruptive technology is going to make oil and refining obsolete. Tesla is way overvalued by any reasonable metrics and the refining sector is significantly undervalued. I see that solar and electric will probably take a hunk out of oil, but I don't see it being significant for another 10 to 15 years. I definitely think the solar industry coupled with better batteries has the capability of playing a significant role in transportation in the future. However, I don't think it will ever displace oil as long as there is a supply in the ground.
The fact of the matter is that electric cars are not significantly greener than gasoline driven vehicles as long as our power comes from coal. If the country could switch to nuclear and this would be coupled with advances in solar, I think it might make the oil industry stagnate. However, I can't see this happening in the foreseeable future. Even if the oil industry is stagnate, it won't go away. Tougher CO2 emission laws may drag the industry down, but I'm not worried about my refining stocks. They will continue to be profitable. They will pay for themselves through dividends alone. If at the end of the decade, it looks like things will change, I may sell. I consider the low price of refining stocks to be a gift to my portfolio!
I've invested in refining for the last 22 years and have found it to usually be very profitable. I think I've beat the DOW and the S&P 500 over the time span that I've invested. The funny thing was that even back when I started, I heard people saying that oil was a dead end and that it would soon go away. I also do believe that oil is going to go away, but probably in about 200 years. Until then, or until the end of the world as we know it, this is a great sector to invest in. Just remember to do your homeowrk and keep your eyes open!
GG - I guess I don't follow your line of reasoning. By my metrics (which are somewhat crude), the values seem pretty close. However, it appears that ALDW edges CVRR out by a small amount at these prices. The only one that I have found that seems somewhat higher by my metrics is NTI. Presently, I have only about 25 % of my refining portfolio in NTI because I believe that ALDW hasn't come into it's own yet. However, I'll admit that CVRR looks pretty good too, I may diversify a small amount into it if I get the opportunity - maybe today would be a good day!
Does anyone think that this company will be bought out in the near future? It seems like WNR purchased a lot of shares in the company and it seems logical that they would just go ahead and buy the entire thing in the near future. If this is the case, I would have to think they would do it soon, while the stock is still low enough to be considered a bargain. I'm sure they'd have to pay a premium on it compared to today's prices, but it seems like a reasonable move. I feel that WNR has the managment capacity to take on more, but I don't know which direction thay may go. It's hard to find a really good deal in today's business environment, so they may not do anything at the present time.
I've been thinking this for about 3 years. It seems like it could be taken over or there could be a merger sometime. However, refining seems to be soaring these days. It may be an expensive time for a move like that.
I decided to switch a small amount of my portfolio from HFC to WNR. After reviewing the numbers, I thought that HFC was good, but WNR has edged them out performance wise over the past couple of years. It also looks like they will continue to do so in the future. WNR is not my major holding in the refining sector, but it looks promising - even at these prices.
I wouldn't say earnings sucked. They didn't meet the analyst expectations, but they still had decent earnings per share, considering the stock price. I think a lot of people had overblown expectations and in the end, they even swayed me a little. However, the first quarter is usually not the best quarter for refiners and even if they didn't improve, the yearly income at this rate would be $ 2.32/share. It's still above a 10 % return. I expect them to continue to perform at least at this level through the 3rd quarter. With a little luck, they may knock one out of the park.
The other thing to consider is that the $ .71 dividend brings the lifetime earnings of this stock up to $ 5.48 + $.71 = $ 6.19/share in about 2.37 years. This means that the average dividend payout per year is $ 2.61/year or about $ .65/quarter. It's over 12.5% per year. That's hard to find nowdays. In fact, I haven't found better except for CVI which is another refinery stock. Most of the large payouts for CVI were nearly 2 years ago, but this stock is still going strong. If anybody has a stock with better dividend returns for the last couple of years, I'd be interested in looking at it! Until I find something more interesting, I'll stay here.
I appreciate the fact that they don't hedge. In the long run, it's a waste of money. In the short run, it can bite you every now and then, as we learned last quarter. The trailing p/e will continue to look artificially low until it falls off the books, but that shouldn't really matter to anyone except the most superficial investor. For the most part, the sophistication of the stock market buyer has increased to the poiint where it won't make a difference.
Just projecting from what other refiners in this area are reporting, I'm now thinking we should be around $.85/share earnings. I wish JVRAT had weighed in and told us what he predicted. He seemed to always nail it within a couple of cents. I don't have the time to do the heavy lifting when it comes to calculating these things, but I can make some market comparisons.
One thing I can see clearly is that the dividends on this stock have on average crushed the paybacks on all other refinery stocks except CVI. I don't know why CVI was so high a couple of years ago, but I have a feeling they were just emptying out their savings. I wish I'd been a part of it, but hind sight is 20/20.
The most comparable refinery to this MLP's holdings is either WNR or maybe HFC. Also, Phillips has a refinery in the area, but it is hard for me seperate the contribution from that refinery to their overall performance. This stock is currently selling at quite a discount to HFC and WNR. Last year, I figured that the discount was about 50%, but it has evened out a little. I made my comparison by comparing earnings/share with the stock price over the 2+ years that this mlp has been in existence. The earnings on this stock have swung dramatically, but the average has remained higher than the others. Actually, the whole refining sector tends to trade at a discount to other stocks and they have been for as long as I can remember. I guess the analysts are eternal pessimists when it comes to this industry. I don't mind, it just gives more opportunity for me!
I guess it's just one more example of the irrationality of the market. They literally crushed the expectations of the analysts, yet the stock goes down. It's never good to invest for the short term because things like this are constantly going on. In the long run, good investments pay. Of course, I've been telling myself this for two plus years. I'm a little dissapointed in the performance. I thought we were through with this sub 40 bs.
This should be a good indication of what is coming. I think it's a given that this quarter will be strong. It also looks like the second quarter is shaping up nicely. Usually,, the 3rd quarter is the strongest for the year, so I'm hopeful that the rough stuff is behind us. I expect this stock to surge by at least 15 % over the next month.
Sounds like a fun way to test whether or not my broker is savvy on these things. The only problem will be that I usually talk to him through e-mail and texts, so I won't be able to tell if it sends him for a loop or not!
A couple of months ago, I bought a lot of ALDW in my IRA. However, I've got this nagging recollection that it was better to buy an MLP in a regular investment account because buying it in an IRA was a kind of double tax protection that was basically unneeded. I don't recall the argument exactly and when I searched for it on the internet it seemed to be pretty confusing. I guess my bottom line question is whether it really is unadvisable to buy an MLP in a retirement account. Obviously, it turned out well for me, but would it have been better to buy it in my regular account?