Petroleum & Resources is a closed-end fund traded on the New York Stock Exchange, under the symbol PEO. It is internally managed and has been around more than 75 years. PEO is the sister company of Adams Express, which owns over 8% of the outstanding shares.
PEO presently sells at a 13% discount from net asset value and its two largest holdings, Exxon Mobile (XOM) and Chevron (CVX), constitute almost 30% of its net assets. For that matter, the top 10 holdings are 54.6% of assets. They are as follows:
|Occidental Petroleum (OXY)||3.8|
|Anadarko Petroleum (APC)||3.1|
|Noble Energy (NBL)||2.6|
|EOG Resources (EOG)||2.6|
|Dow Chemical (DOW)||2.4|
|National Oilwell Varco (NOV)||2.3|
|CF Industrial (CF)||2.3|
I fully understand that this is not a dynamic or aggressive portfolio, but it is a quality portfolio of large-cap energy companies. The five largest sectors are as follows:
|Integrated Oil and Gas||33.9%|
|Exploration and Production||21.6|
|Refiners and Industrial Metals||8.0|
As of December 31, 2012, PEO had total assets of $732,988,462, with nominal leverage (0.7%) and short-term investments of 1%. PEO does have an option writing program, which is approximately 0.5% of its portfolio.
PEO takes long-term positions and is not an active trader. As a result it has a cost basis of $443,421,363 as against a market value of $727,029,382 in its common stock investment. This is to be expected and I suspect that these gains will not be realized for some time to come.
Five-year figures show reasonable performance, low operating expenses and turnover and very decent dividends. These figures are as follows:
|Market Return||NAV Return||Operating Expenses||Income||Turnover|
PEO as well a sister company ADX have both embarked on a managed distribution program to pay out 6% annually. I am not a fan of these types of programs but it seems management believes that the existing shareholders need the annual income. Both firms brag about having in excess of five generations of families as investors.
I like PEO and see no reason why it cannot be a proxy for the energy sector, in everyone's portfolio. This is not an aggressive or high-growth portfolio but it does offer quality and security.