JotCast | 12/28/22 Capitalist Times Live Chat

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12/28/22 Capitalist Times Live Chat

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Elliott Gue

6:11

More broadly I do cover stocks from most sectors in Creating Wealth, including healthcare names like MDT. To be honest, however, my knowledge of the healthcare industry is largely confined to larger names like MDT or big drug companies; I just don't have the depth of knowledge of the sector to stray into the smaller names/biotechs.

Sohel

6:12

Hi Roger, Love the chats! Thanks for taking the time to answer our questions! I recently sold part of my PAGP as you recommended in the E&I Advisor and have kept my ET holding. I think you had both rated aggressive. Could you explain the rationale? Part 2: when prices do correct - is it better to get back into PAGP or just get ET instead.

Roger Conrad

6:12

Thanks Sohel. I did answer this very same question a bit earlier today. But the short answer is debt leverage and revenue stability are the two primary differentiators between "conservative" and "aggressive" ratings in EIA. Plains has made progress cutting debt the past few years. But the business is highly volume sensitive, which exposes revenue to the cycle--for example to a recession next year. And it still has relatively high debt leverage compared to a conservative company like Enterprise, for example. That's basically why we pared back the position as part of an overall risk reduction strategy. In contrast, Energy Transfer is my favorite midstream going into 2023--though rated aggressive because of the continuing need to cut debt. The reason is the company continues to execute management's target of restoring the 30.5 cents per share quarterly dividend and should be able to do so in first half 2023. And yielding over 9% the stock price doesn't reflect it.

Guest

6:14

Hi Roger, As per alert you sent yesterday you mentioned a wish list of stocks to watch from "Chasing a dream" table. Which ones do you favor the most from that list? Thank you and Happy New Year!

Roger Conrad

6:14

I like all of them. The caveat would be to plan to invest in them incrementally per the plan I laid out in the Alert. And don't overload on any of them--particularly if you already own them. They're all great companies and should recover ground lost this year. But there is risk, particularly in the first half of 2023 from rising interest rates and recession.

AARON

6:15

Good afternoon gentlemen. Roger, I subscribe to the CUI, reit sheet, and the utilities news letters and am well pleased with all. I would like your current opinion on 2 stocks. Buy,sell,or hold Realty Income(O) and National

Roger Conrad

6:15

Thanks Aaron.

AARON

6:18

retail properties (NNN). Thank you !

Roger Conrad

6:18

They're both tracked in my REIT Sheet--Realty Income is a buy at 70 or lower and National Retail Properties as a buy at 50 or lower. Both have been hit recently by worries about a recession, which tends to hit owners of retail real estate. But on the other hand, both REITs did prove their resiliency in 2020--which was basically a recession made worse by restrictions on shopping facilities. They also have nice financial and operating cushions that should protect balance sheets and dividends in a prospective 2023 recession.

Guest

6:20

Good afternoon:
What is your opinion of LNG? Thank you and happy holidays.

Roger Conrad

6:20

Per the question I answered slightly earlier in the chat, we track Cheniere's primary asset Cheniere Energy Partners (NYSE: CQP) as a buy at 55 or lower. That would be our preferred way to hold this family, rather than the parent traded as LNG.

AARON

6:21

I am not sure if you received my first transmission.Buy Sell Hold ....National Retail Properties (NNN) and Realty Income (O). Thanks

Roger Conrad

6:21

I did thanks. We had a lot of questions today obviously, so it's taking a while to get to all of them. Thanks for your patience.

john c

6:26

your thoughts on ENLAY and associated ESOCF?

Roger Conrad

6:26

I believe Enel SpA (Italy: ENEL, OTC: ENLAY, OTC: ESOCF) is still on track with its global investing goals in renewable energy and power grid capabilities, and is therefore deeply undervalued at its current price. The big concern here had been ability to finance CAPEX. But the low risk asset sales plan announced in late November significantly reduces risk to the plan--as well as to the balance sheet and dividend. And since I featured the company as my Aggressive Focus stock in the December CUI issue, it's successfully executed asset sales in Greece and Italy, while reaching a new long-term contract with McDonald's. Still rate it a buy, especially below the Dream Buy price for its ADRs of USD7.

Guest

6:32

Hello,I own PAGP since it was originally added to the EIA Actively Managed Portfolio. In issue 213 on 11/29, the PAGP position had a lost of -35.15%. Since that issue, PAGP has gone down yet in issue 214, the PAGP position now only has a loss of -6.46% (reference page 4). How did this happen? My PAGP position still has a lost of close to -40%.

Roger Conrad

6:32

I'm not sure what you're talking about in the table but we will look into it. For reference, the overall portfolio returns are calculated on a dollar basis per the number of shares we hold, not by averaging percentages.

Plains GP Holdings including dividends is up 28.5%, though it's down about -7% since November 29. I show a -33.4% loss since the initial recommendation on June 14, 2018. We have a return of about 4% since we added it last April to the High Yield Energy List.

Guest

6:41

Roger: A little different question this time. My investment history is limited - started with you in 2012. My family relies upon the "distribution" income for retirement from stalwarts EPD, MPLX, MMP, ET and NEP. My recollection over the years is that EPD used to have a yield of 6%-7%, and MMP, ET and MPLX with yields of about 8%. Now they are really high! Question: would you be able to tell us readers the end of the year yield for each of the last 10 years for each of those 5 MLP's? If not, how could we readers find this out? The reason I ask is to try to see what directions these yields are going. I know they are going up, but I swear I have never seen until the last 2 years 10+% yields for these companies. Thanks for your help and guidance,

Roger Conrad

6:41

That's definitely an interesting topic to research for a future issue of EIA. One way you could get there is just to access the pdfs of past Energy and Income Advisor issues, which will contain the Model Portfolio tables. A year ago, for example, Enterprise' yield was about 8% per our table, which is roughly the same as now though it increased its dividend twice this year for a total of 5.6%.

If you're looking for an explanation of why midstream dividends and yields appear to be going up, the biggest reason is where we are in the energy cycle. Midstreams typically don't really make their gains until later in the cycle, when volumes are expanding and they start to gain more pricing power for capacity. We think they'll get there. But in the meantime, those big yields are safe and as I said they're growing.

Lee B

6:44

Thanks always, Roger and Elliot for hosting these so valuable chats. For the first time in a decade I’m considering moving toward a 60/40 portfolio allocation as bonds have become more investable. My largest position is EPD which yields close to 8%. I sort of consider it a bond proxy, but I’m wondering what their mid to long term bond yields are. Or, are there any other corporate bonds you could recommend?

Roger Conrad

6:44

Hi Lee. We're not going to recommend any long-term corporate bonds to you at this time. If you want to invest the bond market, we'd strongly recommend sticking to shorter-term stuff (12-18 months), which for investment grade companies yields close to what long-term paper does and with far less risk to either rising rates or a recession. The Fed's not done here with raising interest rates. And if there is a recession, we'll see spreads between Treasurys and everything else widen out--including for investment grade bonds.

As for Enterprise--it has something bonds don't: Its dividend is growing and thereby keeping pace with inflation.

Jeff B

6:47

I own CIVI and VNOM I would like your opinion.

Roger Conrad

6:47

We like the variable dividends, which let investors participate in higher energy prices. On the other hand, neither Civitas nor Viper is likely pay in 2023 what they did in 2022--for the simple reason that their payouts follow realized selling prices for oil and gas and prices have come down since summer 2022. So if you own them, be prepared for prices to drop a bit next year before they become solid buys again.

Ray

6:49

Happy Holidays! Ceqp has been discussed on some of your chat sessions from time to time. . For an income investor what are your thoughts on Ceqp-p the preferred?

Roger Conrad

6:49

I think Crestwood is a solid midstream company, which means there's not much credit risk to the preferred stocks' dividends. Rather, the risk is from rising interest rates in 2023. Preferred stocks are perpetuities, which means they tend to lose ground like long-term bonds when rates rise. I would also expect these preferreds to lose ground in a recession, as credit spreads widen out. So while the payout appears solid, there's potential for capital losses.

Guest

6:53

Best wishes for the New Year, and that you for this session. Is coal use internationally and domestically investible shorter-term, and, if so, which companies are most likely to do well.

Roger Conrad

6:53

Hi Fred. If you want to buy a coal stock, the best choice for income would be Alliance Resource Partners (NYSE: ARLP), which we do track in our MLPs and Midstream Energy and Income Advisor coverage universe. It yields close to 10% and cash flow/dividends will depend on demand for and the price of coal. The caveat is it still looks very much like demand for coal is going to drop over the next couple decades--and certainly a rational energy policy emphasizing natural gas in the US would speed its demise. So that's something to keep in mind when you chase the income. Metallurgical coal used in steel making is still a big part of BHP Group's (NYSE: BHP) business as well, so that's a lower risk way to bet.

Fred

6:53

Is met coal use internationally and domestically investible shorter-term, and, if so, which companies are most likely to do well?

Roger Conrad

6:53

BHP is our top pick on met coal--primary market is China, which should be a plus in the coming year as that economy reopens.

Alan

6:56

Thanks for answering my question about the American SW - and happy new year in advance! My second question: Which of your portfolios is/are best suited for an individual like me who is planning to retire within the next 2 - 3 years and is a conservative investor aiming to keep up with inflation -- and although nobody has a great crystal ball, what's your best recommendation for timing new investments over the next 4 quarters (in light of your earlier comments about the economic headwinds)?

Roger Conrad

6:56

I would check out the CUI Plus/CT Income and the CW/CT Total Return portfolios to see which fits your style best. Both not only recommend stocks and prices to buy but also relative weights.

As for investing, I like incremental buying--a third of what you intend to ultimately invest now, a third when earnings are announced in late Jan/early Feb and the final third six weeks or so after that. Patience should yield better entry points generally speaking.

Jim N

7:01

What is your take on Vermilion (VET)? It is down from the August high of about $29 to $17. You recommended this oil company in the past. Is it a buy now?

Roger Conrad

7:01

Hi Jim. I think investors over-reacted to the earnings risk of windfall profits taxes in Europe. The company will next announce earnings and update guidance in early March. And they suspended their stock buyback plan and guidance in view of the potential tax impact, which likely means they'll slow dividend increases as well. But with the Corrib project acquisition on track and debt sharply reduced, this still looks like a very solid company. And as I pointed out answering a question earlier in the chat, our highest recommended entry point is still 25--this stock should trade a lot higher before the energy cycle runs its course.

guest

7:05

Roger: Do you know what strategic move AES is making if this is what caused it to call its Indianapolis Power preferred shares, including those with a significant premium?

Roger Conrad

7:05

AES has been utilizing substantial free cash flow to cut debt aggressively in recent years, so redeeming the Indianapolis Power preferred shares is really not that unusual. They're now investment grade at the parent level from Fitch, S&P and Moody's but appear to be gunning for another boost, even as they earlier this month raises the dividend 5%.

It's quite possible redeeming these preferred stocks could be the first step in selling a piece of the utility unit--as we've seen First Energy (NYSE: FE) and others do to raise capital for fund CAPEX cheaply. And this company does have a lot going on, including a $4 bil green hydrogen project announced this month. Next earnings are late February. Until then, AES is a buy at 28 or less for those who don't own it.

arthur

7:08

Happy Holiday and best wishes for 2023. - Southern, Dominion or Duke. Do you have a favorite for a long term buy and hold plan? thanks

Roger Conrad

7:08

I like all three but you want to watch price at this point. Southern still trades above my highest recommended entry point, which I raised to 70 this month because of progress bringing the Vogtle nuclear plant online. Duke is over my highest recommended entry point of 100. Dominion is below (65), mainly because of uncertainty about what will come out of its ongoing strategic review. it's the best bargain of the three now, with that risk in mind.

Al C

7:12

AQN and AQNU Is selling AQN and buying AQNU considered a wash sale? Where are you finding information on AQNU? I did not see it on Algonquins web site nor a couple of other sites where I frequently look up ticker symbols.

Roger Conrad

7:12

They're different securities, so they should not be considered a wash sale. You can find the prospectus for the preferred (pricing date June 18, 2021) on the SEC's EDGAR site. it's dated June 16, 2021. If you're asking what we use, CT has access to Bloomberg Intelligence. I purchased it for my own account at Charles Schwab. The preferred traded 102,607 shares today.

martytwalsh@gmail.com

7:12

Happy New Year and thanks for all your comments

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