THIS MONTH’S ISSUE
Selloff in Progress: Patience is Your Friend
Energy stocks have continued to generally trend lower since the previous issue of EIA posted. The S&P Energy Index is now underwater -10.3 percent year-to-date. The Alerian MLP Index is at slightly less than breakeven, giving back all the early year gains. And the Oil Services Sector Index is in the red by -10.7 percent. Many of the stocks that did best in 2022 have sizeable losses so far in 2023. Chesapeake Energy (NYSE: CHK) is one good example, slipping nearly -22 percent this year after a 61.4 percent return last year. Chesapeake is an oil and gas producer that’s doubly leveraged to energy prices because of a partly variable dividend. So it’s no real surprise that it would sell off this year, given crude oil has dropped from low 80s to high 60s and natural gas from $5 per million BTU to barely $2. Producer stocks will likely continue to slide so long as energy prices are weaker. But even energy companies with minimal direct commodity price exposure have slipped. That includes Energy Transfer LP (NYSE: ET), which barely a month ago was sporting an 11 percent year-to-date return. That key catalyst for the gain was a 15.1 percent ...
Energy Stock Dividends Still Look Solid
Avoiding companies that cut dividends has saved investors a lot of money over the years. And doing so will once again in 2023—a year of elevated recession and stock market risk as the Federal Reserves raises interest rates to crush inflation. When the Fed squeezes the economy, weaker companies crack. And more often than not, the worst damage is in places Wall Street, Main Street and even the central bank itself least expected. That appears to be the case with the current banking crisis. We believe the monetary authorities will do what’s necessary to avoid a wider calamity. Stronger banks ...
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 ...
Dry Powder and Dream Buys
Even the strongest sectors aren’t wholly immune when the overall stock market comes under pressure. And other than a shrinking handful of technology names, that’s the case now. Last November, we began building cash in the Model Portfolio, by taking partial profits in a handful of positions that had run well beyond our highest recommended entry points. The objective was to lock in some of the profits while prices were so high. But we also wanted to accumulate dry powder to take advantage of lower prices for our favored companies later this year. Those moves proved to be quite timely. ...
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.