During the financial crisis, crude oil prices collapsed from almost $150 to $30. The drastic fall was largely due to pessimistic feelings about economic growth and deflation expectations. Legendary investors George Soros and Jim Rogers are among the several hedge fund managers who are bullish about commodities. John Paulson, David Einhorn and Dan Loeb have gold as the largest position in their portfolios. T. Boone Pickens has been investing in energy stocks.
We are observing a strong recovery on energy prices. The world’s energy supplies are limited, yet the demand in emerging markets is growing at a very fast rate. Moreover, a significant ratio of the world’s oil supplies is located in the volatile Middle East countries. The political chaos in North Africa and Middle East caused Brent oil price to hit $110 a barrel for the first time since 2008. There is a possibility that the retail price per gallon might reach a new record high above $4.
While the increasing gasoline costs are definitely not good for consumers, it benefits those who invest in energy stocks. We screened for the top 10 high growth and high dividend companies based in the USA. All the companies in this list have a minimum current yield of 2%, gross margin of 20% and revenue growth rate of 10% in the last 10 years.
Alliance Resource Partners, L.P. (ARLP): ARLP is a producer and marketer of coal in continental USA. 91.8% of its coal production is marketed to the utility companies that produce electricity. Increases in oil prices naturally increase the demand for coal. ARLP is a very profitable company. Profits, operating income and dividends increased by two-fold in the last 5 years. Current yield of 4.7% is above the average return in the coal industry.
CNOOC Limited (ADR) (CEO): CNOOC Limited is an investment holding company that explores, produces and sells crude oil and natural gas products. The company operates mainly in offshore China. CNOOC is growing very fast. Its dividends increased almost eightfold in the last 9 years, from $0.66 in 2002 to $4.7 in 2010.
Enbridge Inc. USA (ENB): Enbridge Inc. operates in both Canada and the United States. The company is involved in liquids pipelines, natural gas delivery, sponsored investments, and a 72% economic interest in Enbridge Income Fund. The company is among the top performing Canadian companies. Quarterly dividends increased fourfold, from $17.5 in 2001 to $0.49 in 2011.
Encana Corporation (ECA): Similar to Enbridge, EnCana is a natural gas company that operates both in Canada and USA. The company pays regular dividends that increased fourfold in last 10 years, from $0.05 in 2002 to $0.20 in 2010.This stock is a hedge fund favorite too. Tom Steyer's Farallon, Leon Cooperman's Omega Advisors, and T. Boone Pickens are among the high profile investors.
Ensco plc (ESV): Ensco is an offshore contract drilling company that operates on a global scale. The company engages in the drilling of offshore oil and natural gas wells under contracts with international, government-owned and independent companies. Ensco’s operating margin is 31%, which is among the highest in the industry. 90% of the Ensco’s stocks are owned by institutions. David Einhorn's Greenlight Capital, Jonathan Auerbach's Hound Partners, and Craig Effron's Scoggin are among the hedge funds that are bullish about Ensco.
Magellan Midstream Partners (MMP): Magellan is a pipeline company that is involved in the transportation, storage and distribution of refined petroleum products. Dividends increased fivefold in the last 5 years; from $0.145 in 2001 to $0.72 in 2010. Current yield of 5.6% is among the highest in the industry.
Petrobras Argentina SA (PZE): Petrobras Argentina has a stable position in Argentina’s energy sector. Through subsidiaries, the company has also expanded its operations to Bolivia, Brazil, Ecuador, Peru, Colombia and Venezuela. PZE has an aggressive growth policy. Revenues and assets increased by 50% in last 5 years.
PetroChina Company Limited (PTR): Petrochina is the largest oil and gas producer and seller in the China. While similar sized companies compete on a global scale, Petrochina has almost a monopoly position in China. Current dividend yield is 3.18%. Revenues increased twofold in the last 5 years. In the last 10 years, the stock price increased 10-fold, from $15 in 2001 to $150 in 2010.
Petroleo Brasileiro S.A. (PBR): Petrobras is an integrated company that explores, produces, refines, transports and distributes oil and gas products. Similar to PetroChina’s status in China, Petrobras has almost a monopoly position in its field in Brazil. Operating margin is 24% and the company pays regular dividends. Last year’s yield was 2.8%. George Soros is extremely bullish about Petrobras, even though he is bearish about emerging markets.
YPF SA (YPF): YPF is an integrated oil and gas company that operates more than 70 oil and gas fields in Argentina. The company has an aggressive growth policy and recently acquired 99.99% stake in Repsol Importadora de Produtos Ltda. Current yield of 5.7% is above industry.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.