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You and I don’t need to call the bottom in today’s market to make sure we’re poised to profit.
Smart investors know that it’s not calling the top or bottom of the market that makes you money — instead it’s finding yourself a good opportunity to buy in an established trend.
Today I want to share with you a couple of my favorite beaten down energy plays. These well-established companies will offer you great risk/reward at today’s prices — plus, they’ll prove to be great turn-around plays when the market rights itself.
Before we get started it’s important to note that these energy plays all feed off of the same basic uptrend we’ve seen in the past 5-10 years. The world needs energy. Heck, it needs all it can get.
And over the next few decades this energy trend will only grow stronger. Even though this may seem odd with the load of natural gas we’re seeing here in the U.S., Globally, oil and gas are getting harder to find.
Combine that with growing demand from the Non-OECD nations and you’ll start to see that energy markets are very tight — and long-term prices only have one way to go, UP!
The best place to look for solid profit potential and a “get paid while you wait” dividend is right here in the U.S. oil patch.
One domestic company that we’ve covered in these pages before is ConocoPhillips (COP: NYSE).
Conoco has hit the newswires recently with a spinoff of Phillips 66, their downstream business (and an investable idea in its own right.)
Now that Conoco is fully devoted to upstream — exploration and production — it offers solid upside when the market heads higher. But more important are some of the strong words that CEO, Jeff Sheets had to say.
Specifically Sheets addressed the company’s dividend policy going forward — and how in the near-term the high dividend payout is fully justified. Specifically he said this, “We recognize that that’s going [to] give us a pretty high yield going out of the box, but we think that’s an issue not with the dividend but with the share price. That’s going be something that will change over time.”
Those are strong, dividend-backing words that you want to hear from a CEO. And here we are out of the box, and Conoco’s dividend is near 5%!
For a large upstream U.S. producer that’s an amazing payout. And if you need a little icing on the cake, just remember ConocoPhillips paid a solid dividend all the way through the market meltdown of 2008. In my opinion if a dividend can make it through that ordeal, then today’s market slowdown won’t present much of an issue.
The next company that I’ll remind you of (since we’ve covered it in these pages a lot lately) is another strong energy play, Statoil (STO: NYSE).
After talking with Statoil’s VP of Strategy for North America, Stephen Bull, it’s clear that Statoil’s North American portfolio is stacked.
With exciting plays in three major unconventional hotspots — Pennsylvania’s Marcellus shale, North Dakota’s Bakken tight oil formation and the South Texas Eagle Ford shale — Statoil is set to increase production in North America dramatically.
This is the kind of fundamental growth that I look for in a down market. Just last week I told you that, “Although the financial markets aren’t following suit, energy in the America’s is booming!”
That same sentiment is still ringing true — and Statoil is proving it. As an investor, this is the set-up you want to see. Statoil is in a profitable niche market here in North America and plans to grow production for the next few years.
To be clear, that means Statoil’s 4.78% dividend looks stable. So while you wait for a market turn around you can rest assure that you’ll still be earning WAY more than your run of the mill bank CD or treasury note can pay.
And of course there’s the real payoff when the market does turn — especially with this energy player…
The last time Statoil shares were this low, prices didn’t stay beaten down for long. In fact, investors that bought in on the last dip were rewarded handsomely with a quick 30% run-up in share price.
That was less than a year ago, and today’s prices are echoing a similar cadence. Repeat rally anyone?
Although we won’t call the bottom in the energy market, these two solid companies offer a great way to play a market turnaround. Plus, with solid dividend history you can rest assured that you’ll get paid to wait!
Keep your boots muddy,
– Matt InsleySource: Daily Resource Hunter
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