If you have filled your car with gas lately you know gas is on the rise. I certainly do as my new car bought last year requires premium gas...ouch! However whenever I fill up I am actually pleased gas is on the rise as I own oil stocks. In fact the gains and dividends I gain from my holdings more than offset increases in the cost of fueling my automobile.
In this posting I am going to discuss some things I know about oil from many years of investing in oil stocks and research about the oil industry. The comments below may not fit your political sensibilities, but facts or facts and frankly I am more interested in making money from foolishness and laughing all the way to the bank as they say. At the end of this posting I will list some stocks you can buy to make some money too.
We need to accept the fact gasoline will never be "cheap" again. As the world develops and the demand for oil increases any spare oil capacity in easy to get oil is over. However if you compare the price of oil to the inflation adjusted price of oil it is actually still rather cheap.
We are told that we are at "peak oil" or that we are now at the point we can not find enough anymore to fill the needs of a world needing energy. This is frankly untrue. We might be at what could be called peak oil at the current cost to produce it, but here is a fact we got more than enough oil to fill the world's needs for generations to come. Do not let anyone tell you otherwise. There are billions of barrels left in Saudi Arabia, billions of barrels left in Russia, and believe it or not billions left in the USA. Most people do not know that we get more imported oil in the USA from Canada that anywhere else. Canada has maybe the largest supply of oil anywhere in the world. Also if there is demand enough for oil and the money to buy it we can increase supply as needed.
Now much of the easy oil has been found and lots of it has been extracted. However as the price per barrel has gone up the higher cost to get oil has become economical to go get. For instance, the most recent big find was right here in the USA in Montana and the Dakotas. We are already getting that oil out and as we look we are finding there is more there than we expected. At least 4 billion barrels there and likely more. Canada is another example where as the price went up the oil sands areas in Alberta became profitable to get out as well.
With oil trading around $100 per barrel you will see many other places begin to "find" oil as well. Brazil only recently found a huge reservoir in the Atlantic off their coast and they have been signing up deep water drillers to go get the oil. Note that lots of this oil to be discovered needs the serious professionals to find and extract. The major oil companies have the skill and know how and where they are not used, Russia for instance, oil production is declining. Not because of lack of oil in the ground, but from the lack of using the skilled people.
The USA has lots of oil offshore in the Gulf of Mexico, off the coast of California, much in Alaska, likely some off the east coast of the United States, and believe it or not in the shale rocks of the mountain west. Several years ago some smart people figured out that high pressure water and chemicals forced deep in the ground cracked open oil and gas bearing rocks and allowed the oil and gas to escape to be extracted. We have discovered since then we are literally floating on an ocean of natural gas here in the USA. Just a decade or so ago no one knew that. We actually EXPORT more gas than we import, due to this fact. If not for political considerations we would be extracting even more of this gas and oil and lessen our dependence of energy needs on outside the USA. Here is where the foolishness comes in. Since the current administration has placed much of the Gulf and coastal waters off limits to exploration as well as much of the mountain west off limits , we will become more dependent on outside sources for years to come. The silliness over the recent BP spill has subsided and like it or not the fishing there this year has been about the best ever. US drillers are the best and spillage is few and far between, so why we allow people in other parts of the world who are less environmentally aware drill and not our skilled people is plainly dumb.
Frankly instead of condemning the people who do the hard work of finding and producing our oil we should be praising them for these efforts that makes our life so much better. Like it or not renewable energy is not going to replace our current energy needs. This is just a fantasy and the costs are too high. Besides we have plenty of oil and gas, which is the most effective energy we have, so why not use it.
Most people do not know that natural leakage worldwide from oil seeping out of the ocean floor is many times the recent BP oil spill putting some common sense to the lie that no oil is spilled unless we drill it out. Oil, like it or not, is a natural part of the earth. Contrary to popular belief, no one really knows if it originates from decay of dead animals (fossil fuel), or occurs from forces deep in the earth where pressures from the super heated core force it to seep to the surface. Either way it is not something evil or bad, it is something we use, just like diamonds, silver, gold, copper, and many other things mankind has discovered that make life easier here on earth. Imagine a world without oil, which not only powers vehicles, but keeps us warm. make medicines, plastics, over 6000 items from this amazing naturally occurring substance. In fact less than half of every barrel used is for gasoline.
We produce about 85 million barrels worldwide daily and consume a little less than that. So when there is just a little of interruption in supply, the laws of supply and demand kick in and you get instant increases in price. Hence the increases with the recent problems in Libya, where only about one million barrels is taken offline. But make no mistake if there is long term increased demand for oil there will be supply if we allow the producers to go get it.
How can your prosper from oil and the silliness regarding supply.
ERF, Enerplus Corporation...just under 7% monthly dividend. This is my personal largest holding in oil stocks. They have oil and gas wells in many places on the North American continent, but mainly in Canada. Not only do I like their diverse holdings, I like the management and the fact the company is in Canada away from any of the current silliness in the current US administration. The stock price is not overly high, and a dividend paid monthly is just plain nice in your account. Note that any Canadian stock has a 15% withholding from your paid dividend, but you can recoup it when you claim taxes in the USA.
DO..Diamond Offshore Drilling...My personal second largest holding. DO pays about a 5% dividend and does business worldwide in deep water oil drilling. I like the fact that few companies do this and DO has lots of experience. Note that the dividend is paid 12.5 cents regular divy and .75 cents special divy.for a quarterly total of .875 cents.
PGH..Pengrowth pays a monthly dividend of just under 7% and is one of the former oil trusts in Canada. Owning this stock is almost like owning an oil well. PGH does have some gas holdings, but is 70% plus an oil producer. I own shares of this stock as well.
COSWF...When it comes to a pure oil play this is as close as it gets. Canadian Oil Sands pays just under a 3% dividend and is the major player in the Canadian oil sands area. They have at least a 40 years supply in their current holdings at current extraction. If you are looking a long term almost guaranteed payout this is it.
CVE..Cevonus Energy...I mentioned this one in another posting and will not reproduce that only to say the price is up nicely since I suggested it and I still like it for a long term holding.
There are other good companies out there which are solid buys and good stock holdings, but you will notice I like Canadian oil stocks where politics does not interfere in my investing and stocks that pay dividends. Now go invest and get back some of that money it is costing you to fill up your tank.
Sunday, February 27, 2011
Friday, February 25, 2011
Assorted Stock Ideas
There are some other stocks which I hold long or hold options and I wanted to take this post to get these out there so as to make known all my holdings for purposes of full disclosure.
ARCC...Ares Capital is a Business Development Company, or better described as a company that takes investors money and invest in up and coming businesses. They do this either buy direct money loans or taking a stock position. Ares is the biggest player in this field and is well managed and knows how to help companies prosper. Hence a nice 8.2% dividend and solid stock price. There are several dozen business development companies, but frankly I like to buy the best of breed and Ares is just that.
JNK...This is a ETF that invests in high yield corporate debt, hence the symbol JNK, or junk bonds. However JNK has prospered even during the late economic downturn. If you had bought JNK back in mid 2008, you could have bought it at around 27, and it is now trading just over 40. Add in double digit monthly dividends and you got a real nice return. JNK has been under pressure lately due to the worry about inflation, but I frankly still believe it is a good buy here it you are someone to buy and hold and just collect the nice payout and not worry about stock price. Still has a high single digit percentage monthly dividend.
PFF..Preferred Stock ETF is a solid selection for income. It features preferred stocks from selected corporations and acts similarly like a bond, but with the advantages of dividend taxation rates and the chance for some capital appreciation. PFF pays out about a 6% to 7% monthly dividend and the divy is about as safe as it comes when considering income.
RRD..RR Donnelley company is the world's largest commercial printer. Yes, this is not a sexy investment and printers of late how not done well financially. But we will always need some printed material and RRD is my pick to survive. They regularly buy up smaller competitors and in my opinion have a well run company that also pays a 5.6% dividend.
I presently own all the securities mentioned above either as a long or option.
ARCC...Ares Capital is a Business Development Company, or better described as a company that takes investors money and invest in up and coming businesses. They do this either buy direct money loans or taking a stock position. Ares is the biggest player in this field and is well managed and knows how to help companies prosper. Hence a nice 8.2% dividend and solid stock price. There are several dozen business development companies, but frankly I like to buy the best of breed and Ares is just that.
JNK...This is a ETF that invests in high yield corporate debt, hence the symbol JNK, or junk bonds. However JNK has prospered even during the late economic downturn. If you had bought JNK back in mid 2008, you could have bought it at around 27, and it is now trading just over 40. Add in double digit monthly dividends and you got a real nice return. JNK has been under pressure lately due to the worry about inflation, but I frankly still believe it is a good buy here it you are someone to buy and hold and just collect the nice payout and not worry about stock price. Still has a high single digit percentage monthly dividend.
PFF..Preferred Stock ETF is a solid selection for income. It features preferred stocks from selected corporations and acts similarly like a bond, but with the advantages of dividend taxation rates and the chance for some capital appreciation. PFF pays out about a 6% to 7% monthly dividend and the divy is about as safe as it comes when considering income.
RRD..RR Donnelley company is the world's largest commercial printer. Yes, this is not a sexy investment and printers of late how not done well financially. But we will always need some printed material and RRD is my pick to survive. They regularly buy up smaller competitors and in my opinion have a well run company that also pays a 5.6% dividend.
I presently own all the securities mentioned above either as a long or option.
Thursday, February 24, 2011
Two Healthcare Stocks and a Bank for Consideration
Healthcare is one of the growth areas in this country. And yes despite Obamacare there are investments here where pay outs are good and safety solid. Healthcare real estate.
In this post I am going to give you two stock selections that I believe provide you with the opportunity to invest in real estate. HCN, Health Care Reit is maybe the best currently. I pays about 5.6% dividend and offers exposure to just about every segment of the healthcare real estate market. HCN is a big company, stock in the S&P 500, and have paid a dividend for many years. These people know what they are doing and do it well. Again, you will not get rich on this one stock, but it is a great way to hit singles and make money regularly.
Another stock I like is SNH, Senior Housing Properties. SNH also exposes you to many areas of health care real estate. It also pays a nice 6.5% dividend. I believe SNH is value priced at $22 or $23 per share and could pay you some capital gains down the line as well.
Presently I am not an investor in most banks. Most of the large banks are just getting back on their feet after a hard two years of the economic crisis. However there is one bank I currently have in my portfolio. NYB, New York Community Bank, serves a niche market in New York state and has recently merged with some smaller banks and now operates in several other states. The niche that NYB serves is financing multi-family housing in the New York City area. It has done well in the business and frankly avoided most of the problems that many larger banks had during the recent economic crisis. NYB also pays a 5.5% dividend. In all this bank will pay you some nice income and I expect as investors begin to see the value in this company the stock price will rise as well.
In this post I am going to give you two stock selections that I believe provide you with the opportunity to invest in real estate. HCN, Health Care Reit is maybe the best currently. I pays about 5.6% dividend and offers exposure to just about every segment of the healthcare real estate market. HCN is a big company, stock in the S&P 500, and have paid a dividend for many years. These people know what they are doing and do it well. Again, you will not get rich on this one stock, but it is a great way to hit singles and make money regularly.
Another stock I like is SNH, Senior Housing Properties. SNH also exposes you to many areas of health care real estate. It also pays a nice 6.5% dividend. I believe SNH is value priced at $22 or $23 per share and could pay you some capital gains down the line as well.
Presently I am not an investor in most banks. Most of the large banks are just getting back on their feet after a hard two years of the economic crisis. However there is one bank I currently have in my portfolio. NYB, New York Community Bank, serves a niche market in New York state and has recently merged with some smaller banks and now operates in several other states. The niche that NYB serves is financing multi-family housing in the New York City area. It has done well in the business and frankly avoided most of the problems that many larger banks had during the recent economic crisis. NYB also pays a 5.5% dividend. In all this bank will pay you some nice income and I expect as investors begin to see the value in this company the stock price will rise as well.
Saturday, February 19, 2011
What is happening in Housing?
If you ask 10 people what is going on in the residential housing industry you will likely get 10 opinions. Here is mine.
Since the mid-1990's when the country came out of the savings and loan crisis there seemed to be nothing but up in residential real estate prices. Many of you do not remember the savings and loan crisis of the late 1980's and early 1990's. That crisis was caused by the change in tax depreciation rules. In a tax act passed by Congress in the late 1986 depreciation allowance was changed from 15 years to 27.5 years. The result was a lowering of prices for rental real estate that at the time mostly financed by savings and loans. Construction rates at the time dropped almost by 50%, since the use of tax incentives to build real estate had been almost halved as well. IN the end the federal government had to step in and rescue many of these savings and loans through FDIC. The cost was significant, but nothing like the current crisis costs.
Sometime in the mid-1990's the US government decided to push banks to extend loans to more people for the stated social purpose of having more people be homeowners. The idea sounded good, but the results have been awful. What commenced was a overreach by the federal housing agencies to insure almost every loan extended and private financial agencies inventing the sub prime loan business and mortgage backed securities wraps. In the end society discovered not everyone needed to be homeowners. This has resulted in a massive overbuilding of housing and the near collapse of the housing industry. Housing prices dropped off a cliff and the Federal Reserve has had to reduce interest rates to 60 year lows in order to keep a complete collapse of housing.
We now reach 2011 and there seems to be no bottom to housing prices. The bad news is there is likely another 10% to 15% tp go on the downside for housing prices. We still have a oversupply and we also have a large number of what is called shadow inventory where banks are holding off foreclosure from the fear more actual supply would depress housing prices further. Add in the fact that the federal government is looking to be exiting support of the housing industry by ending the federal mortgage agencies that insure home loans.
In the end all this will be good as building of houses dictated by the private market would keep supply and demand in focus and result in more stable housing prices, which would be a positive for buyers, sellers, and local governments who depend on property taxes.
My opinion is we are very close to a bottom in housing prices. Evidence the last couple of months private cash buyers have been moving into markets buying up the most price depressed housing. These buyers see bargains and are taking advantage of the opportunity. I expect these people know they may not be buying at the bottom, but since no one can call the absolute bottom now is the time to move. They also see mortgage rates have begun to move up. Rates for 30 years loans that had reached 4.2% are now closing in on 5.0%. The next act here will be that banks will begin moving more shadow inventory on the market and that should result in another leg down in prices and maybe some movement down in rates. But understand banks now are getting on their feet and will be able to control this situation, so do not expect any serious movement in prices or rates.
The good news (if you are not a builder) is that housing starts are way below what is needed to replace inventory being sold. That will take a good number of years to work off, but it is happening. So do not expect a significant increase in housing prices right away. The other good news is that the large number of children born in the 1980's and 1990's in this country's latest baby boom will soon be in the household forming ages As these people enter the market existing inventory will be further reduced and housing starts will pick up. My best guess is that we are about 8 to 10 years from seeing this occur in earnest, but as we move forward prices will begin to move up again.
How does one take advantage of this situation? If you have cash or credit consider buying some housing carefully selecting for price, location of course, and interest rates. You will likely never find a better time in your lifetime to buy a home of your own and if you are an investor it's look pretty good too. You can also take a look at mutual funds that invest in real estate and ETF's that do the same. There are few residential real estate REITS and frankly I do not see any that I would recommend.
People who have the resources and buy real estate now could very well look back in 10 years or so and realize some significant capital gains. Opportunities like this come only once in a lifetime and now is your chance.
Since the mid-1990's when the country came out of the savings and loan crisis there seemed to be nothing but up in residential real estate prices. Many of you do not remember the savings and loan crisis of the late 1980's and early 1990's. That crisis was caused by the change in tax depreciation rules. In a tax act passed by Congress in the late 1986 depreciation allowance was changed from 15 years to 27.5 years. The result was a lowering of prices for rental real estate that at the time mostly financed by savings and loans. Construction rates at the time dropped almost by 50%, since the use of tax incentives to build real estate had been almost halved as well. IN the end the federal government had to step in and rescue many of these savings and loans through FDIC. The cost was significant, but nothing like the current crisis costs.
Sometime in the mid-1990's the US government decided to push banks to extend loans to more people for the stated social purpose of having more people be homeowners. The idea sounded good, but the results have been awful. What commenced was a overreach by the federal housing agencies to insure almost every loan extended and private financial agencies inventing the sub prime loan business and mortgage backed securities wraps. In the end society discovered not everyone needed to be homeowners. This has resulted in a massive overbuilding of housing and the near collapse of the housing industry. Housing prices dropped off a cliff and the Federal Reserve has had to reduce interest rates to 60 year lows in order to keep a complete collapse of housing.
We now reach 2011 and there seems to be no bottom to housing prices. The bad news is there is likely another 10% to 15% tp go on the downside for housing prices. We still have a oversupply and we also have a large number of what is called shadow inventory where banks are holding off foreclosure from the fear more actual supply would depress housing prices further. Add in the fact that the federal government is looking to be exiting support of the housing industry by ending the federal mortgage agencies that insure home loans.
In the end all this will be good as building of houses dictated by the private market would keep supply and demand in focus and result in more stable housing prices, which would be a positive for buyers, sellers, and local governments who depend on property taxes.
My opinion is we are very close to a bottom in housing prices. Evidence the last couple of months private cash buyers have been moving into markets buying up the most price depressed housing. These buyers see bargains and are taking advantage of the opportunity. I expect these people know they may not be buying at the bottom, but since no one can call the absolute bottom now is the time to move. They also see mortgage rates have begun to move up. Rates for 30 years loans that had reached 4.2% are now closing in on 5.0%. The next act here will be that banks will begin moving more shadow inventory on the market and that should result in another leg down in prices and maybe some movement down in rates. But understand banks now are getting on their feet and will be able to control this situation, so do not expect any serious movement in prices or rates.
The good news (if you are not a builder) is that housing starts are way below what is needed to replace inventory being sold. That will take a good number of years to work off, but it is happening. So do not expect a significant increase in housing prices right away. The other good news is that the large number of children born in the 1980's and 1990's in this country's latest baby boom will soon be in the household forming ages As these people enter the market existing inventory will be further reduced and housing starts will pick up. My best guess is that we are about 8 to 10 years from seeing this occur in earnest, but as we move forward prices will begin to move up again.
How does one take advantage of this situation? If you have cash or credit consider buying some housing carefully selecting for price, location of course, and interest rates. You will likely never find a better time in your lifetime to buy a home of your own and if you are an investor it's look pretty good too. You can also take a look at mutual funds that invest in real estate and ETF's that do the same. There are few residential real estate REITS and frankly I do not see any that I would recommend.
People who have the resources and buy real estate now could very well look back in 10 years or so and realize some significant capital gains. Opportunities like this come only once in a lifetime and now is your chance.
Wednesday, February 16, 2011
Duke-Progress Merger
This posting discusses two local favorites, Duke Energy, DUK, and Progress Energy, PGN. Unless you live under a rock you know these two regulated utility companies, pending approval, have agreed to merge. I expect the merger will be approved and occur later this year.
Presently I believe both these companies are soundly run and provide good dividend income for investors. When they do merge the company that emerges will be the largest utility in the USA and a payout of about 5.5%. A few years ago Duke got into trouble by doing business in energy trading outside it's expertise of running a regulated utility. Duke got smart and rid itself of those assets and got back to running it's utility. Progress, on the other hand never bought into the energy trading business, due to frankly what I believe is better management and continued to prosper. A few years ago they had a good merger with Florida Progress energy that I believe has helped both companies. Progress took several years to sell off not core assets from the Florida Progress merger and get down to it's knitting to being a regulated utility. Progress has run into some cash flow problems of late, due to some government mandates, and after many years of an increasing dividend has not raised the divy for a couple of years.
In case you are not aware of what I mean by "regulated utility", I mean one where the states the company operates in allows a monopoly service area in exchange for earning a pre-approved percentage return on assets. The usual return is generally in the area of 11% to 12%, which is about right for paying a dividend and paying the expenses with little or no growth. Utilities are a capital intensive business, due to the high costs of building power plants and energy delivery infrastructure, so it is essential they pay a nice dividend to attract the investor capital necessary to run their business. Growth comes from expansion of business by other companies who buy electricity in their service area and population growth.
Progress and Duke need this merger to consolidate some costs and allow the company to cover increasing expensive federal and state renewable energy mandates. However I would expect one or two new nuclear plants to commence once they get together to cover increasing power needs in their service areas, so called renewable energy just frankly can not cover.
I like the new company and believe it will be a good place to get income and some growth. I am some concerned about the regulatory atmosphere as mandates for renewal energy have hurt Progress and Duke the last few years and if added to could hurt profits by increasing expenses and thereby raising rates on consumers. One big positive however is the new company will be headed by Bill Johnson of Progress Energy, who in my opinion is frankly a much better leader than Jim Rogers of Duke.
I want to mention two other regulated utilities here. One SCG, South Carolina Power, a excellent run utility. They operate mainly in South Carolina and have possibly the best regulatory environment in the country. The share price has risen over the last year and pushed the divy percentage down due to investors starting to notice this quality operation. Still a nice 4.5% payout however. Another utility I have warmed up to of late is AEP, American Electric Power. AEP serves 10 states and has a huge customer base. Payout of around 5.1%, which I believe is secure. AEP recently raised their dividend as well.
I am currently either long or own options on AEP and DUK, I have in the past year owned options on PGN
Presently I believe both these companies are soundly run and provide good dividend income for investors. When they do merge the company that emerges will be the largest utility in the USA and a payout of about 5.5%. A few years ago Duke got into trouble by doing business in energy trading outside it's expertise of running a regulated utility. Duke got smart and rid itself of those assets and got back to running it's utility. Progress, on the other hand never bought into the energy trading business, due to frankly what I believe is better management and continued to prosper. A few years ago they had a good merger with Florida Progress energy that I believe has helped both companies. Progress took several years to sell off not core assets from the Florida Progress merger and get down to it's knitting to being a regulated utility. Progress has run into some cash flow problems of late, due to some government mandates, and after many years of an increasing dividend has not raised the divy for a couple of years.
In case you are not aware of what I mean by "regulated utility", I mean one where the states the company operates in allows a monopoly service area in exchange for earning a pre-approved percentage return on assets. The usual return is generally in the area of 11% to 12%, which is about right for paying a dividend and paying the expenses with little or no growth. Utilities are a capital intensive business, due to the high costs of building power plants and energy delivery infrastructure, so it is essential they pay a nice dividend to attract the investor capital necessary to run their business. Growth comes from expansion of business by other companies who buy electricity in their service area and population growth.
Progress and Duke need this merger to consolidate some costs and allow the company to cover increasing expensive federal and state renewable energy mandates. However I would expect one or two new nuclear plants to commence once they get together to cover increasing power needs in their service areas, so called renewable energy just frankly can not cover.
I like the new company and believe it will be a good place to get income and some growth. I am some concerned about the regulatory atmosphere as mandates for renewal energy have hurt Progress and Duke the last few years and if added to could hurt profits by increasing expenses and thereby raising rates on consumers. One big positive however is the new company will be headed by Bill Johnson of Progress Energy, who in my opinion is frankly a much better leader than Jim Rogers of Duke.
I want to mention two other regulated utilities here. One SCG, South Carolina Power, a excellent run utility. They operate mainly in South Carolina and have possibly the best regulatory environment in the country. The share price has risen over the last year and pushed the divy percentage down due to investors starting to notice this quality operation. Still a nice 4.5% payout however. Another utility I have warmed up to of late is AEP, American Electric Power. AEP serves 10 states and has a huge customer base. Payout of around 5.1%, which I believe is secure. AEP recently raised their dividend as well.
I am currently either long or own options on AEP and DUK, I have in the past year owned options on PGN
Sunday, February 13, 2011
Should I buy gold?
It is almost impossible to turn on the television, listen to the radio, even surf the web, without some advertisement from a company offering to sell you gold. Usually the pitch centers around the fact that gold has doubled or tripled in value over a certain period of time and you should get in on the next big gain. Most people, not just investors, ask themselves should I buy some gold since it seems everyone else is doing it. The answer frankly depends on what value you personally place on gold.
First off, let me say, the following comments are my personal opinion and not necessary what might be right for you. Gold has been around for centuries as either use as monetary exchange or as a storehouse of value. Many years ago most countries on earth stopped using gold as a currency of exchange and more as as storehouse of value. The US government has the world's largest gold holdings, most held at Fort Knox in Kentucky. If you look at your money you will find it is says "federal reserve note". Those of old enough to remember when there were bills that said "silver certificate", that was a time when silver backed the money and you could exchange paper money for actual silver. People personally buy gold for jewelry and for protection against inflation since gold price will generally go up with the rate of inflation as it is a commodity with finite resource. Gold also has other uses, such as in the air bags in your car where the fact gold does not tarnish makes the circuit that activates your airbag almost guaranteed to work regardless of age.
I personally own no gold and likely do not expect to do so in the future. Frankly I believe there are many other better ways to protect yourself against inflation. Here I will list three investments I consider better than gold, but will provide you with similar inflation protection.
The reason I like them better than gold is they pay dividends and provide something gold does not and that is we NEED these products to make the world work daily. Gold is a concept, a price, has not PE and no dividend to quote James Grant.
Oil is something no country on earth can do without. You need it for transportation, we need for many things you likely would be surprised come from oil. Google it and take a look. Anyway if you not liking the increase in gas prices, buy some oil stocks and participate in the money making. Oil itself is supposedly a finite resource and therefore it's price should behave as gold when inflation is high. Oil also being priced in dollars will also increase when the US government prints money, as it is doing right now. So again there is built in protection for you as an owner of oil. How do you buy gold, oil companies, drilling companies, and oil well trusts. I tend to like Canadian oil companies, mentioned in a post earlier here, but there are other ways to participate. Some are well known, like the Prudhoe Bay oil trust in Alaska, BPT. Other companies by symbol are, CRT, SJT, and SBR. There are numerous other trusts that literally own the oil or gas well and payout a monthly percentage to the owners depending on price and success of extraction. Most pay around 6% or so and note they all will complicate your tax return with K-1's
Another way to protect yourself against inflation is with another metal, copper. Copper is essential to today's computers, the building wiring in housing, and most electrical divices. Copper has become so valuable due to a lack of supply. Hence the reason you hear daily of air conditioning units getting stolen. There are many ways to play copper, but hands down my favorite is SCCO, Southern Copper. the copper mines they own are in Mexico, Peru, and Chile. China, due to it's rapid growth, is the world's largest buyer of copper and SCCO sells a lot to China. SCCO pays a 5% dividend and the stock price and dividend go up and down with the price of copper. No where else can you be exposed so directly to copper and the chance to protect yourself against inflation with this scare resource.
If you have been to the grocery store lately, you know the price of meat and bread are up and going up. Interesting the US government says there is no inflation, the people who do the figures need to go to the supermarket once in awhile you think? The reason for this increase is the cost of fertilizer. Fertilizer is increasing, due to several factors. One is the people in particularly Asia are eating better food and more meat, so they are needing more corn to feed stock animals. Also again, the US government has mandated use of ethanol and ethanol is made of corn, which farmers are raising more of, but the demand for food and ethanol is outpacing supply. The key here is being the so called arms dealer to people growing corn and food crops. POT, Potash corporation, based in Canada, is in my mind the best play here. There are other companies participating in this business, but nowhere else do you get direct exposure to the key ingredients of fertilizer production than POT. If you want to look at a pretty stock chart check out POT 2 year. Two year is basically a ride from $80 to $190. Their most recent report was a doubling of earnings, 3 for 1 stock split, and a doubling of the dividend, what's not to like.
Presently I am not long any security mentioned, but have in the past owned SCCO and will not do so within
First off, let me say, the following comments are my personal opinion and not necessary what might be right for you. Gold has been around for centuries as either use as monetary exchange or as a storehouse of value. Many years ago most countries on earth stopped using gold as a currency of exchange and more as as storehouse of value. The US government has the world's largest gold holdings, most held at Fort Knox in Kentucky. If you look at your money you will find it is says "federal reserve note". Those of old enough to remember when there were bills that said "silver certificate", that was a time when silver backed the money and you could exchange paper money for actual silver. People personally buy gold for jewelry and for protection against inflation since gold price will generally go up with the rate of inflation as it is a commodity with finite resource. Gold also has other uses, such as in the air bags in your car where the fact gold does not tarnish makes the circuit that activates your airbag almost guaranteed to work regardless of age.
I personally own no gold and likely do not expect to do so in the future. Frankly I believe there are many other better ways to protect yourself against inflation. Here I will list three investments I consider better than gold, but will provide you with similar inflation protection.
The reason I like them better than gold is they pay dividends and provide something gold does not and that is we NEED these products to make the world work daily. Gold is a concept, a price, has not PE and no dividend to quote James Grant.
Oil is something no country on earth can do without. You need it for transportation, we need for many things you likely would be surprised come from oil. Google it and take a look. Anyway if you not liking the increase in gas prices, buy some oil stocks and participate in the money making. Oil itself is supposedly a finite resource and therefore it's price should behave as gold when inflation is high. Oil also being priced in dollars will also increase when the US government prints money, as it is doing right now. So again there is built in protection for you as an owner of oil. How do you buy gold, oil companies, drilling companies, and oil well trusts. I tend to like Canadian oil companies, mentioned in a post earlier here, but there are other ways to participate. Some are well known, like the Prudhoe Bay oil trust in Alaska, BPT. Other companies by symbol are, CRT, SJT, and SBR. There are numerous other trusts that literally own the oil or gas well and payout a monthly percentage to the owners depending on price and success of extraction. Most pay around 6% or so and note they all will complicate your tax return with K-1's
Another way to protect yourself against inflation is with another metal, copper. Copper is essential to today's computers, the building wiring in housing, and most electrical divices. Copper has become so valuable due to a lack of supply. Hence the reason you hear daily of air conditioning units getting stolen. There are many ways to play copper, but hands down my favorite is SCCO, Southern Copper. the copper mines they own are in Mexico, Peru, and Chile. China, due to it's rapid growth, is the world's largest buyer of copper and SCCO sells a lot to China. SCCO pays a 5% dividend and the stock price and dividend go up and down with the price of copper. No where else can you be exposed so directly to copper and the chance to protect yourself against inflation with this scare resource.
If you have been to the grocery store lately, you know the price of meat and bread are up and going up. Interesting the US government says there is no inflation, the people who do the figures need to go to the supermarket once in awhile you think? The reason for this increase is the cost of fertilizer. Fertilizer is increasing, due to several factors. One is the people in particularly Asia are eating better food and more meat, so they are needing more corn to feed stock animals. Also again, the US government has mandated use of ethanol and ethanol is made of corn, which farmers are raising more of, but the demand for food and ethanol is outpacing supply. The key here is being the so called arms dealer to people growing corn and food crops. POT, Potash corporation, based in Canada, is in my mind the best play here. There are other companies participating in this business, but nowhere else do you get direct exposure to the key ingredients of fertilizer production than POT. If you want to look at a pretty stock chart check out POT 2 year. Two year is basically a ride from $80 to $190. Their most recent report was a doubling of earnings, 3 for 1 stock split, and a doubling of the dividend, what's not to like.
Presently I am not long any security mentioned, but have in the past owned SCCO and will not do so within
Wednesday, February 9, 2011
Is Tobacco Investing for You?
If you have concerns about socially inappropriate investing quit reading now, as this version is about tobacco investing. There are several stocks that do business here I will concentrate of some I believe to be excellent long term investments that pay above average divys.
Tobacco is a highly addictive product. The people worldwide who use this product seems to never be bothered by economic concerns and that provides solid fundamentals for companies who produce and sell tobacco to users. As an investor there are few places where you can gain dividends this high and stock prices that rarely go down.
MO, Altria, is simply the best of breed. Price currently is about $23-$24 and it pays a 6.5% dividend. MO raises their dividend every year and last year raised it twice. There are few companies who are so investor friendly and so well run at MO. Frankly this company is a annuity. A government guaranteed monopoly. The government is hooked on the Master Settlement pay outs agreed to back several years ago that brought tobacco companies under the FDA. Your dividend is basically guaranteed by the fact no one can advertise tobacco and therefore no one can take market share away. As an investor it is just hard not to like Altria, whose main product is Marlboro cigarettes.
Another tobacco company is RAI, Reynolds American, which produces Winstons and Salems. Reynolds, based in NC, is the remnants of the old RJ Reynolds company and is a well managed company that also pays a nice dividend at 6.2%. Reynolds just raised it's dividend nicely and I would expect to see similar increases regularly. Reynolds has more exposure to smokeless tobacco than most other tobacco producers and that is the growing side of this business.
LO, Lorrilard is the king of menthol cigarettes. The main products are menthol flavored cigs. LO is facing some threats to this segment of the business as the FDA is considering banning menthol from cigs. The price of the stock has been hurt recently by this threat hanging over the company with the price being down about $10 per share to around $75. LO pays a nice divy as well at 6.0%. Frankly I do not see the FDA outright banning menthol as it would for all intents and purposes kill the company. Obviously investors think the same or the stock price would be down even more. LO is highly profitable and has aggressively raised it's payout of late, so if you have some willingness for risk buy some shares now and when the FDA makes their decision sometime in March you could get a nice bump in capital gain.
PM, Phillip Morris, is the spun-off international wing of Altria. PM also pays a good dividend at 4.5%. PM, now based in Europe is now outside the threat of American trial lawyers and is the growth company for tobacco. They have significant assets in Japen and China. Yes, China, where over one billion potential customers lie and the chance to gain serious additional profits.
I am currently either long or own options on all securities named above except PM.
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