Five Oil Investments to Purchase in a Volatile Market 08/09/2024 | | | Right now, the world's wealthiest investors are preparing for what could become 'the biggest financial event' of 2024.
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Click here to find out. Click Here... | | | | Five oil investments to purchase in a volatile market give investors a chance to acquire shares in the companies at reduced prices.
All five oil investments to purchase after the Aug. 5 market dip also pay dividends to reward investors for their patience while demand for the so-called black gold is waning due to a slowing economy in China, the world's most populous nation. These five oil investments also tend to show resilience in a variety of economic conditions.
For investors seeking a proven performer, consider a stock that I personally have owned for years due to its consistent dividend payments and generally rising share price. I learned about Enterprise Products Partners (NYSE: EPD), a master limited partnership, from Mark Skousen, PhD, the head of the Forecasts & Strategies investment newsletter who also leads the Five Star Trader advisory service.
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Five Oil Investments to Purchase in a Volatile Market: EPD
Dividend payouts are a sweetener for investors to own shares in EPD. With a current dividend yield of 7.3%, EPD can help keep long-term investors like me calm even when the market drops as it did Monday, Aug. 5.
The Dow Jones Industrial Average fell that day more than 1,000 points, or 2.6%, while the S&P plunged 3% and the technology-heavy NASDAQ slid 3.4%. Nonetheless, the markets covered some of that ground on Tuesday, Aug. 5, and in the following days.
Goldman Sachs analysts opined that investors have amassed "significant cash piles" that can be used to purchase shares of stock that become tempting opportunities for bargain hunters. EPD could be one of those stocks for investors who do not mind that its status as a master limited partnership that causes shareholders to cope with a K-1 document at tax time. A K-1 requires additional time and effort for me and others to navigate each tax season.
Ben Franklin scion Mark Skousen, head of Five Star Trader and Forecasts & Strategies, talks to Paul Dykewicz.
Citigroup placed a $33 target price and a buy rating on EPD, based on a net present value (NPV) that implies enterprise value (EV)/earnings before interest, taxes, depreciation and amortization (EBITDA) multiple of 9.75x, per the investment firm's 2025 estimates.
Of course, risks exist to reach that price target, Citigroup wrote. They include weaker-than-anticipated Permian production growth, global recession risk amid a petrochemical downcycle and ongoing regulatory risk, which may hinder future growth projects.
Chart courtesy of www.stockcharts.com
Five Oil Investments to Purchase in a Volatile Market: PSX
Houston, Texas-based Phillips 66 (NYSE: PSX) is another oil industry buy recommendation. The company reported second-quarter adjusted earnings per share (EPS) of $2.31, exceeding Citigroup's estimates of $1.97. Improved midstream business performance drove the good results, along with record volumes, reduced costs and roughly $30 million in one-time benefits.
Refining utilization reached 98%, the company's highest in five years. But refining adjusted earnings before, interest and taxes (EBIT) still declined quarter over quarter. PSX returned $1.325 billion to shareholders in 2Q, roughly in line with consensus of $1.342 billion. Total return of cash now stands at $11.2 billion since July 2022 (versus a $13 billion-$15 billion target by year-end), Citigroup wrote in a research note.
Phillips 66's Rodeo facility in the San Francisco Bay area increased rates to approximately 50,000 BPD (800 million gallons per year), reaching the company's goal of achieving full capacity by the second quarter of 2024. The announcement on June 26 marked a significant step in Phillips 66's commitment to play a meaningful role in the energy transition and provide customers with reduced-carbon solutions.
Rodeo is now listed as a separate line item, as expected. The full conversion of the Rodeo Renewable Energy Complex expands PSX's commercial-scale production and positions Phillips 66 as a leader in renewable fuels.
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Northern Oil & Gas Inc. (NYSE: NOG), based near Minneapolis, Minnesota, is a "very cheap" energy stock with a price-to-earnings ratio (P/E) of just 4.9335 and surprising growth in its oil and gas properties, Skousen wrote to subscribers of his Five Star Trader advisory service. With less than 40 employees, NOG operates largely under the radar, he added.
The company's unique business model avoids drilling wells and operating rigs, but instead takes partial positions in more than 10,000 operating wells in the Williston Basin, the Appalachian Basin and the Permian Basin in the United States. Northern Oil & Gas has one of the highest profit margins that Skousen recalls ever seeing in an energy stock.
Northern Oil's Chief Technical Officer James Evans said earlier this year that the company's business model features capital discipline, cost control and downside protection through diversification and a "diligent hedging policy." NOG also aligns executive compensation to the company's performance.
A buy recommendation also is placed on the stock by Citigroup. The investment firm wrote that Northern Oil's performance was driven by production topping expectations, as oil was in line, while natural gas beat forecasts and lease operating expenses (LOE) exceeded estimates.
Northern Oil's capital spending fell below estimates and natural gas pricing surprised to the upside. The company's focus remains on growth and its efficiency-oriented strategy with near-term digestion of recent acquisitions likely to remain the priority, Citigroup wrote. The investment actually raised its target price on NOG to $52 per share due to the company's solid growth trajectory and prudent operational strategy buoyed by a relatively low-risk business model balanced against a volatile commodity pricing environment.
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Kimbell Royalty Partners LP (NYSE: KRP), a Fort Worth, Texas-based owner of minerals and royalties nationwide, has a portfolio that includes approximately 17 million gross acres in 28 states and in every major onshore basin in the continental United States. That includes ownership in more than 129,000 gross wells with 50,000-plus wells in the Permian Basin of West Texas.
The company went public in February 2017 and maintains a buy recommendation from Citigroup. The partnership's production in the second quarter dipped slightly below expectations as oil slipped on light results from the Permian Basin and some ancillary operational volatility, Citigroup wrote. However, the investment firm did not expect it to be a trend given that KRP's oil-weighted basins currently compose about 59.1% of the company's net well inventory.
That points to a marginal reversion in the coming quarters, Citigroup wrote. KRP's performance was buoyed by stronger-than-expected pricing as a counterweight. Plus, the investment firm projected KRP would continue to execute its inorganic growth strategy and remain active in the mergers and acquisitions markets in the coming quarters.
"We continue to favor their broad geographic diversification and low-risk business model with additional comfort gained from the line-of-sight embedded in their net well inventory; consequently, we retain our Buy / High Risk rating and $20/share target price," Citigroup wrote.
Another fan of Kimbell Royalty Partners, L.P., is Bryan Perry, who leads the Cash Machine investment newsletter whose holdings average an annual dividend yield above 10%. Kimbell Royalty is a high-yield pure play in the oil sector that the seasoned Wall Street professional recently recommended to become a "key addition" to Cash Machine's blended portfolio of diverse assets.
Chart courtesy of www.stockcharts.com
With geopolitical risks that include wars in Ukraine, Gaza and elsewhere, along with rising defense spending in Russia, China and the United States, a spike in oil prices could occur at any time, Perry cautioned. Those who scoop up a double-digit-percentage yield from a "flourishing" royalty enterprise will have an investment that is likely to outperform going forward, Perry wrote to his subscribers.
Kimbell Royalty has grown from a single investment in the Permian Basin to one of the largest owners of minerals and royalties nationwide. That growth is the centerpiece of an unquestioned success story.
Bryan Perry leads the Breakout Options Alert advisory service.
Five Oil Investments to Purchase in a Volatile Market: AMZA
Another Cash Machine recommendation by dividend-loving Perry is InfraCap MLP ETF (AMZA). Perry has successfully recommended the fund in the past and decided to do so again in late November 2022. The fund has risen nearly 33% since then.
The fund's assets encompass double-digit-percentage ownership in its top five MLP positions, with oil featured prominently. The top five holdings and their respective weightings in AMZA are Plains All American Pipeline, L.P. (16.63%), MPLX LP (16.22%), Western Midstream Partners L.P. (16.07%), Energy Transfer L.P. (14.73%) and Sunoco L.P. (14.50%). Enterprise Products Partners is AMZA's sixth largest holding, with a 11.05% weighting.
Recent pullbacks in AMZA's price give prospective new shareholders a chance to purchase on a dip. Those who love to buy low have an opportunity to do so.
Chart courtesy of www.stockcharts.com
For dividend seekers, the five oil investments to purchase offer an opportunity to tap richly flowing cash flows. They also provide robust dividend payouts that may further sweeten the profits from share price appreciation generated by these oil-oriented investments. | | | Sincerely,
Paul Dykewicz, Editor
DividendInvestor.com
| | About Paul Dykewicz: Paul Dykewicz is an accomplished, award-winning journalist who has written for Dow Jones, the Wall Street Journal, Investor’s Business Daily, USA Today, Seeking Alpha, GuruFocus and other publications and websites. Paul is the editor of StockInvestor.com and DividendInvestor.com, a writer for both websites and a columnist. He further is the editorial director of Eagle Financial Publications in Washington, D.C., where he edits monthly investment newsletters, time-sensitive trading alerts, free e-letters and other investment reports. Paul also is the author of an inspirational book, "Holy Smokes! Golden Guidance from Notre Dame's Championship Chaplain", with a foreword by former national championship-winning football coach Lou Holtz. Follow Paul on Twitter @PaulDykewicz. | | | | | |
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