THIS MONTH’S ISSUE
Oil Turns Bullish, Energy Stocks Stay Strong
We invite you to join us at the Orlando MoneyShow, where we’re presenting on Thursday October 17. Hope to see many of you there in person! Thanks for reading.—EG, RC. Oil and natural gas prices remained under pressure the last month. Benchmark crude oil futures dipped under $70 a barrel earlier this month, for the first time since last December. Equivalent natural gas is still well off its spring lows, when the fuel’s price dipped briefly under $1.50 per million BTU. But we’ve yet to see a sustained break above the $3 mark, a minimum level for many producers to consider ramping up output. We think the bottom is in for now for both commodities. And we look for a sustained uptrend to resume this year. One reason is simply that expectations could scarcely be lower. We note that futures speculators’ net position in oil was recently more bearish than it was in 2020, at the height of the pandemic year impact on demand. That’s a tacit forecast for global demand to collapse over the next 6 to 12 months, with China’s disappointing growth and election year jitters no doubt looming large. But to our eyes, it’s a pretty clear...
Live Chat
with Elliott Gue and Roger ConradOn 10/29/2024
Endangered Dividends List
Endangered Dividends List companies are vulnerable for one or more of the following reasons: Cash flow coverage of distributions is inadequate. Elevated debt levels with imminent refinancing needs. Revenue pressure triggered by weakness for at least one key asset. Inability to access the equity market on favorable terms to fund capital spending, forcing management to utilize more internally generated cash flow. Exposure to volatility in commodity margins from either rising or falling prices of raw materials. Aggressive general partners anxious to buy in limited partners’ cash flows at discounted prices. Regulatory reversals. Expiring contracts with little hope for renewals at...
Portfolio Strategy: Dividends Grow, Stocks Follow
Just because a company raises its dividend doesn’t mean its underlying business is necessarily strong. And we’ve always been skeptical of lists of “Dividend Aristocrats” and the like—often published in big investment media—that tout stocks with decades-long records of raising payouts every year. But in the case of the stocks in our Model Portfolio and High Yield Energy List, systematic and accelerating dividend increases are an unmistakable sign of inner strength. And they’re a big reason why we want to own them this energy up cycle. Too much debt combined with weaker industry conditions produced 100 plus dividend cuts in...
Extreme Pessimism, Contrarian Bullish Crude
The oil market is already largely pricing in a global recession and collapse in demand. Speculators in the West Texas Intermediate (WTI) and Brent oil futures market are more bearish crude today than at the height of draconian 2020 COVID lockdowns and the associated commodity price collapse: The blue line on this chart shows the net position of non-commercial traders in the West Texas Intermediate (WTI) crude oil futures and options market. Typically, this is a good contrarian indicator for oil because speculators in the oil market are generally trend-followers. That means when they get very long oil amid a...
Meet Our Editors
Elliott H. Gue
Founder and Chief Analyst
Since earning his bachelor’s and master’s degrees from the University of London, Elliott has dedicated himself to learning the ins and outs of this dynamic sector, scouring trade magazines, attending industry conferences, touring facilities and meeting with management teams.
Roger S. Conrad
Founder and Chief Analyst
Roger S. Conrad has successfully advised income investors since the 1980s, with a nationally acclaimed sector specialty in utilities, telecommunications and energy. He’s a managing partner of Capitalist Times author of Power Hungry, independent director of NYSE-listed Miller Howard High Income Equity Fund and contributing editor to Forbes.com.
