JotCast | 11/26/24 Capitalist Times Live Chat

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11/26/24 Capitalist Times Live Chat

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Bonnie C.

4:29

I am sending my questions in advance because I may not be able to attend the chat.

Although today’s chat is focused on utilities I have some REIT questions which I hope you can address before year end.

What do you think about the following three REITS?   I got a notice in my e-mail that these are good investments for dividend growth:

O, PK, CCI

PK has a 6.6% dividend, plus there will be a special dividend payout at y/e.   I did not see PK listed in your overall REIT Universe.

Crown Castle - CCI - Zacks upgraded it to a buy.

AHH and Boardwalk REIT both seem to be good buys and both had large dividend increases this year.   Are you considering adding these two companies to the REIT Sheet?

Also, what are your thoughts on the Single Family Residential Fund and Private Credit Fund offered at Arrived.com and the individual properties they list as investments?

Have a Happy Thanksgiving and holiday season and thank you for all your help, as always.

Warm regards

Roger Conrad

4:29

Hi Bonnie. Happy Thanksgiving to you! This chat is really just focused on whatever anyone wants to ask about--very happy to talk about REITs. And I do have a new issue of REIT Sheet that I plan to send out tomorrow, which will actually include the full REIT Sheet database. All the earnings are in so I decided to push it up a month.

To answer your questions, Realty Income is a reliable dividend grower, though management has basically tapered off increases this year as cash has gotten tight. Crown & Castle has frozen its payout until it can reverse revenue declines to competition. I have not covered Park Hotels and will put it on the list to consider for coverage--the yield is well less than 2%, however, when you exclude special payments.

I do cover both Armada Hoffer and Boardwalk in REIT Sheet. Boardwalk would be a buy at a lower price. AHH is now a buy at 12 or less on strong Q3 results. I have not covered the Arrived.com offerings. But as a rule, I think we're better off with publicly traded REITs.

johnspm

4:30

Your latest read on prospects for APA, which has been sinking lately?

Elliott Gue

4:30

The stock got slammed after reporting earnings on November 6th down 11%+. I think the big problem wasn't the quarterly results, but their guidance.

It looks like they cut their capital spending (CAPEX) guidance for next year; however they also guided their oil production lower. That appears to be due to lower-than-expected Permian output. Generally, the market likes to see discipline on CAPEX in a weak to flat commodity price environment (like now) but will punish companies that project a significant decline in production after cutting CAPEX. So, you see companies rewarded for greater capital efficiency -- more or the same production at a lower CAPEX level -- but that's not the case with APA. They did sign a new pricing contract in Egypt, which (hopefully) will solve some of the problems they've had their with the local government not paying the bills timely. However, I just think there are better E&Ps out there as buy candidates.

Richard L.

4:34

Hello Roger,
Long time subscriber. How many stocks and etf’s should a hypothetical 1 million dollar portfolio hold? Should they be equal weight or based on quality? What should be the maximum amount in the largest holding? Should a 3 million dollar portfolio hold the same number of holding but just have 3 times as much per holding? I hope these questions make sense. Thanks again

Roger Conrad

4:34

Hi Richard. if you're interested primarily in income, I would suggest you check out my CUI Plus/CT Income service, which we're also offering aa a part of the Dividends Plus service on Substack. It's a diversified and weighted portfolio of high quality dividend paying stocks drawn from multiple industries. Not every holding is weighted the same, though I generally try to keep them around 5% in most environments. And there's a cash component as well, which is still larger than I've held in past.

The portfolio is also scalable, based on a model of $100,000--so a $3 mil portfolio would simply own 30X of what's shown in the model. I would also add that a truly balanced estate overall should include other assets besides stocks, such as real estate.

Dave F.

4:39

Just one follow-up question, some analysts clearly don't believe the guidance being provided by the CEO and CFO of AES. I presume that you've met with these people in person at conferences. What is your take on their credibility?

Roger Conrad

4:39

Hi Dave. I think you're really talking about one analyst--who is easily identified in the earnings call. I don't think it's fair to say no one trusts AES' management. And in fact as I pointed out in this chat, there's only one sell recommendation among analysts tracked by Koyfin as well as Bloomberg Intelligence. Most are still rating this stock buy.

I will say AES' share price does in no way reflect guidance for upper single digit earnings growth the next five years--at just 6X expected next 12 months earnings. So arguably the stock is already priced for failure.

Ultimately, the test of credibility is if the posted numbers measure up to the promises. I can't say AES will going forward but they have to date.

Jim D

4:40

I may have hit enter by mistake. I'm looking for comment on developing a fixed income program for ballast/diversification/ to offset aggressive equity portfolio in the event of repeat of 2000, 2008, 2018 & 2022

Elliott Gue

4:40

We launched a new service called Smart Bonds last May where we follow a strategy along the lines you propose in your question using bond exchange-traded funds (ETFs). Generally speaking, the best bonds to own in the event of a recession would be long-term Treasuries. However, our view right now is that recession isn't imminent. So our bond/fixed/income credit exposure in the service is weighted in favor of corners of these markets that can perform well even when the economy is OK and short-term rates (the Fed) is slow to cut. That would include variable rate markets like floating rate preferred and senior bank loans/CLOs. We also have some limited exposure in the model portfolio to intermediate-term corporate and Treasury bonds, which can perform well in a "soft landing" scenario and potentially even better in a hard landing outcome. We'd plan to pivot the portfolio in favor of longer-duration Treasuries and investment grade bonds if and when the economic data weakens further in line with what

Elliott Gue

4:40

we'd expect to see ahead of recession. I think one of the key points to remember is that not all bond/credit/preferred markets get hit when rates are high and the economy is strong -- some of these markets offer solid returns in that environment. The key we think is to manage your exposure to various niches of these markets through the cycle rather than just buying-and-holding broad exposure to fixed income.

lee

4:43

you recently wrote in your substack you didn't like the ura etf for uranium. i know you like ccj are there any other stocks you like

Roger Conrad

4:43

We bought Cameco very low in Energy and Income Advisor. We bought Constellation Energy, Vistra Energy and other nuclear power stocks in Conrad's Utility Investor also well before the current nuclear power hype. We've done quite well with all of them. And as I noted in my Substack post, the biggest profits from a nuclear power revival are yet ahead. But when stocks move so far in a hurry, it almost always makes more sense to start thinking about taking money off the table rather than putting it on. And that's the case with nuclear power and uranium now. Be patient. We're not likely to see the lows again. But we are pretty certain to see lower prices, when Wall Street "discovers" another hot theme.

Guest

4:45

Thank you for your advice and for this chat so close to a Thanksgiving. Could you briefly review your perspective on Energy Transfer.?

Roger Conrad

4:45

I think the biggest gains are ahead for Energy Transfer LP--it's a bit above my highest recommended entry point of 18 at the moment, which is a price a lot of people thought we'd never see. So I would be patient with new purchases. But the yield of nearly 7% is going higher. And I think we'll see a double from here by the end of this energy cycle, several years from now.

Cliff

4:48

What are your thoughts on metals and mining companies predominantly involved with lithium?

Roger Conrad

4:48

Hi Cliff. I would generally avoid them, as well as most small mining companies at this time. But I would take a hard look at stocks of the larger players in the mining space--which despite great production profiles and balance sheets are very cheap right now. BHP would be at the top of the list. EIA Model Portfolio pick ExxonMobil also has one of the largest LI deposits the world--and you won't find a more steady company.

Lee

4:49

Mr. Gue what is your take on the reverse split of BITI? I read somewhere Trump and Musk are very pro cripto

Elliott Gue

4:49

Generally, investors don't like to buy ETFs trading at very low prices. So, ETF issuers do reverse splits to keep the price of an ETF at a range where it may seem more attractive -- usually over $20 or so. It doesn't have any specific fundamental meaning and it doesn't change the value of the ETF's assets.

Donald Trump has talked favorably about bitcoin/crypto and I suspect the SEC will be more inclined to approve crypto ETFs once Gary Gensler leaves in January. SO, there's definitely a perception the Trump Administration is positive for bitcoin.

I have two thoughts on that. First, short-term I wonder how much of the crypto "Trump Trade" is already in the price -- bitcoin popped to almost $100,000 from approximately $70,000 before the election. SO, I think there's risk of a buy the rumor, sell the news reaction next January in crypto.

Elliott Gue

4:49

Second, I continue to believe bitcoin and crypto are speculative "risk on" assets very different from traditional precious metals. So, I think in risk-off type of environments such as we saw in 2022 the declines in bitcoin/crypto could fairly steep.

Scotty

4:52

Where to view the presentation

Elliott Gue

4:52

Thanks for attending the chat. There's no specific presentation, it's a Q&A chat. Type in a question and hit "Send" and we'll answer all the questions we get on this chat.

Fred

4:55

How high would the proposed tariffs have to be to cover the proposed tax reductions?

Roger Conrad

4:55

Hi Fred. I think there are far too many unknowns here to make an intelligent guess. First off, tariffs can be put in place on day one. Tax cuts require an act of Congress. And unlike the Bush Administration of 2001-08, Republican majorities are relatively narrow, especially in the House where it could actually be narrower than it is now. That means at a minimum nothing changes until 2026--and what gets through is highly uncertain as well. Second, there's speculation that the new president will use tariffs as a cudgel to get what he wants on other issues, including bilateral trade agreements--which means the big numbers being tossed around now wind up moot.

Energy, utilities and REITs are three areas of the economy where tax cuts are far more likely than damage from tariffs. But I think the best way to deal with what's basically unknowable now is to just build positions in the highest quality stocks as cheaply as you can. And keep some cash--basically what we've been doing the past few years.

Denis

4:59

Please comment on US and Canadian energy corps that will play major roles in AI.

Roger Conrad

4:59

Hi Denis. I've highlighted electric utilities as being double beneficiaries of AI--both internally using data to improve efficiency and cut costs while boosting safety and resilience to wildfires and storms; and feeding the electricity demand needed to run AI enabled data centers. And I think there are still a large number of stocks worth buying as a bet on that--including battered AES Corp for those who don't already own it. I also like natural gas pipeline companies like KMI and TRP, which are in the process of signing contracts to supply power stations to run data centers--a group that's only now starting to get interest. I would be wary of nuclear companies, mainly because they've already run and only a handful have actual earnings.

Dave F.

5:01

How big of a factor do you think end of year tax loss selling will be in further driving down the portfolio's 'losers'? e.g. BCE, AES, NEP

Roger Conrad

5:01

I think it's likely to be a factor, though a lot of tax loss selling actually occurs before the end of the calendar year as mutual funds and other pools of capital adjust for the end of their fiscal years. Also, many investors try to do their selling at least 30 days before the end of the year, so they can avoid the wash rule if they want to buy back in before January--when beaten down stocks the previous year tend to rally.

Guest

5:06

What are your thoughts on SMR? I read that it's the only company certified by the US govt to provide SMRs for energy production. Is that accurate? Thanks

Roger Conrad

5:06

Two words on NuScale Power Corp (NYSE: SMR): No earnings. There are also no commercial orders, nor are they likely to be until the company can build a scalable prototype with costs that can be reasonably estimated. What the stock does have is a massive hype factor by virtue of having a US government permit to go ahead with development--that has more than quadrupled the share price since early September.

There are a limited number of "pure plays" on nuclear development, the consequence of there having been little activity in the US for decades. And there's a lot of money that's crammed into those names. These stocks could go higher if more money goes into them. But if you look at the history of earnings-less companies, you'll see it can come out even faster.

BKNC

5:08

I would be curious on your latest thought for BCE?

Roger Conrad

5:08

I don't really have anything to add to what I've said already in this chat. I do think Q3 results showed stability and I think the US fiber company purchase will wind up being earnings accretive. I think the Canadian regulatory environment remains a headwind. But that too will eventually change. This is a cheap stock for patient investors.

BKNC

5:12

Hi Roger, Could you give us your latest thoughts on BCE? I would also be interested in your thoughts for AMX. Hi Elliott, I have noticed TTE has been dropping. Any thoughts, and is it time to add?

Roger Conrad

5:12

America Movil looks very cheap at these levels--down primarily because of what's happening to the Mexican Peso on fears about tariffs. Looks like a solid buying opportunity for anyone who doesn't own it and still my favorite play on Latin American telecom.

I'll answer in TotalEnergies. This looks like a hit from a combination of weaker oil prices and the US investigation of an Indian businessman behind Adani Green, which has caused the company to pause investment in India. The company has also paused its offshore wind project in New York, presumably because of obstacles to permitting under the new administration. On the other hand, the company has plenty of other places to invest to grow. And it's still primarily an oil and gas company, so higher prices will give a big boost. We'd stick with it.

Jim D

5:13

too many interruptions and premature sends. I'm constructing my fixed income portfolio from "Smart Bonds" recommendations to provide ballast to a $2+MM diversified aggressive equity portfolio. I'm looking to add / incorporate $300,000 composed of PFFV, FALN, FLBL, JAAA, JBBB, BINC & TLTW in equal 1/7 positions. Appreciate any comments, critique, cautions, etc. Thanks for holding these valuable events and your many years of straight talk. Been subscribing to multiple EIA services since "Personal Finance"; Utility Forecaster, etc. I hold no debt. Own my house, kids completed masters degrees, 2 cars & other possessions; so no major expenses coming due or planned.

Elliott Gue

5:13

Thanks for the question and for being such a long-time reader. And, sorry, the chat system can be a bit "buggy" at times. All the names you mentioned are names we recommend or have recommended except for BINC, which is sort of an aggregate bond ETF that holds a mix of Treasury/Mortgage and corporate bonds. While I can't provide individualized advice, I'd mention three points. 1. In my view, it's important to control risk in this market via position sizing. An example is that a name like JBBB or TLTW are going to be more volatile than the overall bond market (or an ETF like BINC).

Second, and related to #1 is that some of these ETFs would be more exposed to downside in an environment like 2008 where the economy slips into recession. For example, TLTW basically owns long-term Treasuries, so that should benefit. However, the "BBB" rates loans in JBBB or the loans in FLBL could suffer in a deteriorating credit environment. So, if you're looking to provide ballast/a hedge to an aggressive equity portfolio

Elliott Gue

5:13

you might consider underweighting those names a bit or just being ready to reduce their weightings if an when we need to "pivot" to more of a recessionary/defensive posture in the service. Third, the steadiest and least risky corner of the fixed income markets would be short-term government bonds -- even though the Fed has cur rates 75 bps, our top pick in the s-t gov't bond world is SGOV, which still offers a yield just a little under 5%. Not an exciting pick to be sure, but I do think it's a valuable source of ballast for the overall model portfolio. Also, my plan has been to park money there as a sort of cash alternative, then sell that ETF down as needed to accommodate new ideas for the portfolio. Hope that helps.

Dudley

5:15

Your thoughts on TLN please. Noticed it’s UTG’s largest position. Thanks for holding these sessions.

Roger Conrad

5:15

Talen is expensive now as are other non-utility power producers that own nuclear power plants. I think there's a fair chance a Republican majority at FERC next year will allow the company to contract with Big Tech at the Susquehanna nuclear plant, which would be a plus. but I think this stock has come a very long way in a hurry and it's time to think about taking money off the table rather than putting it on--as we're doing with our gains in Vistra and Constellation this year to an extent.

John

5:22

Hi Elliot. These chats are very helpful- thanks. How much of a correction in XOM would you like to see before you recommend new purchases?

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