We are in a holding pattern as far as our buying program is concerned here as we are accumulating cash and holding what we have. We should have a few dividends and distributions coming in over the next month or so as well as some of our own contributions to the retirement account and we will look at that time to see if we can pinpoint any buys at that time. For those who have been asking us about what we would recommend in the oil and natural gas sector for retirement portfolios, please read below because we give you three names which we feel comfortable with (and one which we personally own in our own retirement account).
Oil & Natural Gas
SandRidge Energy (SD) had the blow out we were looking for as shares traded down to the mid-$6/share range on above average volume of 18.6 million shares. Shares finished the day at $6.67/share after rebounding a bit to close down only $0.24 (3.47%) during yesterday's session. This is an opportunity for long-term traders to set up positions and once again unload in the $7/share neighborhood which is a trade that has worked more often than not here. We still think that this is a $10/share stock moving forward and that those who buy in the $6/share range shall do quite well when all is said and done.
We have received quite a few emails over the past month or so regarding which oil plays we would buy for a long-term focused or retirement portfolio. We recognize that we generally cover trading ideas and those more geared towards shorter term trading, so today we wanted to take an opportunity to highlight a few which we would be buying if we were sitting in cash and looking to deploy it for long-term investing in the industry.
We have this theory that should nuclear warfare wipe out the human population that there are a few things one could count on and that is that cockroaches would still exist and ExxonMobil (XOM) too! Joking aside, we think that the company is built to withstand almost any storm and that this is a stock which should be part of any retirement portfolio. True, the yield is a bit low at 2.5% and we would like to see it higher, but over time the company has shown an ability to drive growth and buy back shares with the money they keep rather than paying dividends. Currently the stock is coming off of 52-week highs, and it is a bit rich here, but the company possesses a great management team and has been very well run for some time.
Chevron (CVX) is another name which we like for those wanting exposure to oil and natural gas with a solid dividend and strong balance sheet. The yield is a bit higher here than at ExxonMobil with a yield of 3.2%. We like the prospects for the company here as they are stepping up exploration and we like where the company has positioned themselves moving forward. If you look at some of the more exciting shale plays here in the US you will see that Chevron has been assembling an attractive portfolio of properties and it is because of this that we could envision the company buying out a large shale play deploying their considerable financial resources to develop that property portfolio.
The next entity is one which we personally own in our personal long-term portfolios as well as our retirement one, so it is safe to say we strong believers in the outlook of the units. We are discussing EV Energy Partners (EVEP) and their prospects for the Utica which gives the stock its upside potential. The partnership is assembled to benefit from rising natural gas prices as well as a sale of their undeveloped Utica acreage which are in fact the second largest in the play. The units yield 4.8%, but we would like to point out for readers that there are limits on distribution income for retirement income so one should seek out the guidance of their tax planner when assembling a large holding of MLPs and the like. Although the units trade at a richer multiple than peers, it is due to the anticipated sale of Utica assets which we think that when completed will drastically reshape the partnership and prove that today's prices are in fact cheap. Time will tell.
Physical gold has fallen precipitously over the past few weeks and has begun to take a toll on the gold miners. We are still bullish on both gold and gold miners as well as the entire precious metals complex. They probably got a bit too far ahead of themselves after the Fed's announcement of QE3, but long-term gold is headed higher as the purchasing power of fiat money continues to decline. We have this notion that China, if it is serious about becoming either an option for the world's reserve currency or the reserve currency that they will need to link to gold to differentiate their "product" from that of the rest of the world. It is not that far-fetched of an idea as every reserve currency has in some way been linked to gold in the past and China has a ton of US dollars to spend on something, so why not on gold to back their own currency? It would certainly put an end to the US's complaint that they have devalued their currency for trading purposes and really turn the tables on the rest of the world as it becomes obvious just how much our currencies have been devalued. One of our long-term ideas which will probably get a few people worked up, but we continue to like gold and AuRico Gold (AUQ) as our play on it.
Disclosure: I am long EVEP.