XOM

The Quiet Analyst Speaks

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Image Description and Source: Mailslot for Cantor Fitzgerald, on the top floors of the WTC. The mailslot was located in a post office near the WTC site. The mailslots are with the Smithsonian Institution. Travis Wise. It’s 9pm Sunday, September 11, 2016. The day is a somber one. The 15th year passing of the tragic events of 9/11 were on everyone’s minds, and I can’t help but think specifically of Cantor Fitzgerald. The financial services company’s headquarters were on the 101st-105th floors of One World Trade Center, just a few floors above the impact zone of one of the hijacked airplanes. The firm lost 658 employees, over two thirds of its workforce, more than “any of the other World Trade … Read more

Distributing Truth on MLPs

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By Kris Rosemann The recent merger break-up fiasco at Energy Transfer Equity (ETE) and Williams Companies (WMB) has put the master limited partnership (MLP) conversation back into the spotlight, after the two entities were unable to finalize a merger that had been announced in fall 2015 and would have created the largest pipeline company in the US. The deal between Energy Transfer Equity and Williams was officially terminated by Energy Transfer Equity June 29 after a court ruled that the firm was legally able to walk away from the agreement when it was unable to deliver an opinion on the tax treatment of the transaction that was required by June 28. Williams has since stated that it will seek monetary … Read more

Crude Oil Prices Now Near $40 Per Barrel

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Image: Top holdings of the Energy Select Sector SPDR; source: State Street. Call it luck. Call it good timing. Call it what you will, but we’re calling it tactical prudence within a portfolio management context. The newsletter portfolios have been on the “long side” of energy equities now for the better part of the past few months, after having negligible exposure to the energy-sector bust for most of the past few years. We continue to target achieving the goals of the newsletter portfolios, and we think tactical exposure makes sense at this time. West Texas Intermediate crude oil prices (USO) have now advanced to ~$40 per barrel from the depths of the mid-$20s just a few months ago, and while … Read more

Best Idea Michael Kors Up 20%+ — Yawn?

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“A significantly “undervalued stock” that is dropping like a rock is a huge red flag, and the Valuentum system offers a methodological overlay to incorporate the very valuable information contained in  share prices.” – Brian Nelson, CFA What a day for Michael Kors (KORS)! At the time of this writing February 2, shares of the aspirational brand are soaring 20%+. Yes, it is a holding in the Best Ideas Newsletter portfolio, “Valuentum’s Best Ideas Portfolio,” and yes, we added to the position in Michael Kors November 5, 2015, “Email Transaction Alerts.” The email transaction alert, which included some profit-taking in Altria and additions to the positions in Buffalo Wild Wings and Michael Kors, can be downloaded here. Prior to the … Read more

The Bounce in Energy and Potash’s “Surprising” Dividend Cut

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Nothing like Valuentum’s optimistic article last week, January 21, in Barron’s to get the energy markets popping, “Is Kinder Morgan on Road to Recovery,” would you say? Of course, we say that in jest. The equity markets January 28 were defined by optimism that two of the globe’s major energy resource producers, the cartel OPEC and Russia (RSX), would finally come together to alleviate the pain that has been exerted on the price of the black liquid the past 12-24 months with a “meeting.” What we found to be peculiar, however, is that instead of OPEC letting what turned into a “rumor” run, helping to further drive crude oil prices higher, OPEC delegates quickly denied the talk of a potential … Read more

Moody’s Puts Oil & Gas and Mining Sectors on Review

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By Kris Rosemann On January 22, Moody’s placed 120 oil and gas companies (XLE) from across the globe on review for a credit rating downgrade. The list ranges from massive global producers such as Royal Dutch Shell (RDS.A, RDS.B) and Total (TOT) to nearly 70 US exploration and production and services (“E&P”) companies. It also includes 55 mining companies (XLB) that have been punished by the recent rout in commodity prices. Alcoa (AA), Rio Tinto (RIO) and Vale (VALE) are a few notables that made the list for a potential downgrade. The news is not completely unexpected, however, and may likely be a response to several executive teams pointing to legacy (outdated) counterparty/customer ratings as reasons to not be concerned … Read more

Bye Bye Energy MLPs

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West Texas crude oil prices (USO) just broke through $32 per barrel to the downside for the first time since 2003. Share prices of those in the energy complex (XLE) continue to reel, and we maintain our view that the tremendous fallout in energy master limited partnerships (AMLP, AMZ) may not be over. From our perspective, the MLP business model may not survive in its present state, as equity markets continue to “wise up” to the artificial equity pricing paradigm that has centered on the group’s financially-engineered payouts. Without an artificial pricing paradigm to “prop up” their equity prices, for example, the incentive to perpetuate such a business model is substantially reduced. Distribution cuts would then inevitably ensue as a … Read more

Seeking to De-risk the Newsletter Portfolios

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There’s never a good reason to panic in investing, but the 276-point slide in the Dow Jones Industrial Average (DIA) January 4, the worst start to a year since the credit crisis in 2008, reminded us why we hold more than a 30% cash position in both newsletter portfolios at the moment: with a US stock market still near all-time highs, we like having ample capital available to scoop up bargains as stocks inevitably give back some of their gains. The question for us is not whether the broader US stock market will decline from here but whether such a decline will be 10%, 20% or more. After all, the S&P 500 (SPY) has essentially tripled from the March 2009 … Read more

Is the Worst Behind Us? Not Likely

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By Brian Nelson, CFA US natural gas prices (NGAS) recently dropped to the lowest level in nearly 14 years. Unseasonably warm weather may be to blame for the near-term drop, but we point to more structural concerns that may keep natural gas prices low for some time. Including both unconventional and conventional global natural gas resources, for example, there are more than 200+ years’ of supply based on the current trajectory of demand, and that doesn’t account for technology advances that will inevitably be made in the coming decades. Can you believe it? The situation with crude oil prices is not much better. West Texas crude oil prices (USO) dipped below $35 per barrel recently, still the high end of … Read more

Dividends Not Safe as Energy Markets Swoon

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We’ve been cautious on the oil and gas markets (XLE, AMLP) for some time, and that includes our October move closer to market neutral on the sector, but we’re still underweight the group. We’ve been saying that crude oil prices are more likely to hit the $20 per barrel level than move significantly higher, and we maintain our view that they may never again return to the $100 per barrel, a level many have grown accustomed to. After all, why should they? Unfortunately, the fallout continues to punish traditional “buy and hold” investors who have been trained to ignore most “news” and may still be holding on the belief of the fallacy of mean reversion, something that we believe cannot … Read more