JotCast | 12/28/22 Capitalist Times Live Chat

Return to

12/28/22 Capitalist Times Live Chat

Prev Page View Full Chat Next Page

Roger Conrad

7:12

Thank you Marty. And Happy New Year to you and yours.

guest

7:16

Can you explain how the arbitrage opportunity between BEP and BEPC works? Thanks

Roger Conrad

7:16

I think it's really accessible only to large institutions. But the partnership unit and C-Corp shares of Brookfield Renewable represent the same ownership and pay the same dividend. The difference is how they're taxed. I believe unless Brookfield decides to consolidate the shares, the C-Corp shares will trade at a premium to the partnership units--mainly because many institutions can only own C-Corp shares. But I've also noticed that the price gap does wax and wane, so investors could theoretically short BEPC and buy BEP. For my money, however, I'd rather just own one or the other and bet on a recovery next year as Brookfield continues to profitably add new assets.

jerry

7:21

NEE is at $83.10 and NEP is at $71.04. You recommend buying both under $80, despite NEP's consistent drift downward. What is the reason for the great disparity between these two stocks of one company and why do you still recommend buying NEP??? The market is telling us that there is a significant difference between the two.

Roger Conrad

7:21

Hi Jerry. I NextEra Energy is a large best in class regulated utility with the best in class contract renewable generation development company. It has a market cap of $165 bil plus, is 85% owned by institutions and tracked by 19 Wall Street firms (16 buys, 3 holds). NextEra Energy Partners is basically a financing vehicle for NextEra Energy. Its market cap is just $6.2 bil. NEP yields 4.4%, or about twice NEE. And dividend growth is comparable.

One reason to buy NEP over NEE is that higher yield. But these are really two different investments. And while prices have generally moved together over time, no one should expect them to be in lockstep.

jerry

7:27

You still recommend buying BEP under $40 but today it is at $24.54. It has been going steadily down, so the market is telling us that this stock is not worth anything close to $40.

Roger Conrad

7:27

As I noted answering several questions in the chat, there are several reason for Brookfield Renewable Partners underperforming this year. My view is the current level reflects mainly nervousness about the company's ability to close a series of rather large acquisitions--including Origin Energy in Australia and Westinghouse's nuclear unit. And management is going to have to prove the economics of these deals, as well as its ability to fund them economically. But it has proven its ability to close deals profitably in the past and I think it will here as well.

Guest

7:29

Roger, I am looking at the U and V Preferreds of TDS, which is the 5th largest telco in the country. they have high dividend yielsds that appears sustainable but the Preferreds prices coninue to decline. Any thoughts?

Roger Conrad

7:29

I answered a question on TDS preferreds earlier in the chat and won't repeat what I said there. But basically, these preferreds' prices are facing a major headwind from rising interest rates as well as concerns about TDS' financial strength--with revenue under pressure and CAPEX finance costs rising. And that''s reason to be cautious.

jerry

7:31

Why do you still recommend buying Canadian stocks for capital appreciation?? They just don't. BEP, TC BCE and PBA are probably fine for coupon clippers but they almost never significantly appreciate. They either just sit in a certain small price range or go down significantly. Why not just recommend these stocks for dividends only??

Roger Conrad

7:31

We basically recommend high dividend stocks for the long-term total returns they can generate. And all of these--even Brookfield after this year's decline--have done quite well over the past couple decades on that score.

7:33

Your recommended price "I rate Pinnacle a buy on dips to 70 or lower" is because of the difficulty with previous dividend approvals

Roger Conrad

7:33

It's mainly because of the uncertainty with Arizona regulation. Pinnacle took a big earnings and share price hit this year from a punitive rate case decision last year. And while their appeal appears to be going better, an unexpectedly negative ruling could well send it back under 70 again.

Tommy L

7:35

Roger: in your CUI+ newsletter your portfolio covers most sectors of the market with one or two specific equities. Which do you feel will be the most resilient in 2023? Thank you and Elliott for these webcasts, and a happy new year to both of you.

Roger Conrad

7:35

One big advantage with the diversified approach is we don't have to play the sector game--the outperformers and underperformers balance each other out over time, so long as the underlying businesses of stocks we pick stay solid on the inside. As a theme, though, I think the key is being able to keep up margins in the face of inflation pressures and higher interest rates. That's why we've focused so strongly on free cash flow, as well as businesses that have shown the ability to pass on costs.

arthur

7:37

Hi Roger, Any reason to continue to hold Precious Metals & Mining Trust (TSX: MMP-U, OTC: PMMTF) at this time? Do you still follow it? Fortunately a very small position; but in a tax deferred account so no immediate benefit to selling if you think it may rise from the dead at some point.or should i just enjoy the $0.0074 dividend ;~}

Roger Conrad

7:37

I have not followed it for years. As a metals play, I prefer the two miners we have in the CUI Plus portfolio--BHP and Newmont Mining (NYSE: NEM).

Guest

7:40

What is your view on the long bond? Do interest rates head down in 2023?

Elliott Gue

7:40

My view is that the Fed keeps hiking rates into 2023, inflation comes down somewhat but remains elevated. The reason is that inflation has cyclical and secular components -- lower demand (recession can address the cyclical issues but won't change the secular (supply-side problems). As for the long bond, I think there will be a rally (lower yields) next year as investors reallocate capital from stocks to bonds in a safe haven trade. But, over the next 5-10 years I suspect buying long-term Treasuries will produce negative real returns just like in the 70's. I am recommending the TLT ETF in Creating Wealth on the safe haven view.

Tommy L

7:40

Roger, In the CUI+ portfolio we had a spin-off of shares of ACLLY. Did you make a hold, buy or sell recommendation? Thank you.

Roger Conrad

7:40

Hi Tommy. We did have a spinoff of Organon from Merck and we took shares of Woodside when BHP spun off and merged its oil and gas assets with that company. We sold positions in both rather than scale them up. We did not get any Accelleron, though it's a substantial company. Not in our coverage universe so I don't have an opinion for you today.

BobD

7:46

I've held Williams Company (WMB) for a long time and it has gone up rather well over the last couple of years. Should I be thinking of taking some profits, or continue to hold and collect the growing dividends?

Roger Conrad

7:46

Williams has turned the corner as a well-managed, financially strong midstream company with a focus on key natural gas markets. I think the purchase of the MountainWest Pipeline will prove highly profitable as well. And dividends are rising at a low-to-mid single percentage rate on reliable basis.

As we've said, the midstream sector is often last to really take off in an energy up cycle. And we fully expect Williams and others to at least revisit their highs of the previous cycle, which for this company was the low 60s. You're going to have to be patient to get there. But the dividends are pretty good incentive to stick around. We rate Williams a buy at 32 or less.

PeteH

7:52

Hi Roger and Elliott, Thanks for your guidance over the years, and happy New Year to you and your families. Question on First Energy Corp (FE): what would make you upgrade FE's quality grade to A (currently at B). Also with earnings expected to grow at 6-8% through 2025 can we expect dividend to start growing again soon, or are CAPEX and debt still too high for management to consider it? With the visibility we currently have, what would you consider a fair price to take profits on the stock. Thanks in advance

Roger Conrad

7:52

Thanks Pete. First Energy still doesn't quite get to an "A" Quality Grade rating for a couple reasons. The main one is it's still working its way past the Ohio bribery case, which is understandably still having an impact on regulatory relations in what's become a contentious state for utilities. The leverage picture is another reason--the company is not yet investment grade on the parent level across the board, though it looks like it may be next year. Before I raise the buy target again, I would like to also see a return to regular dividend growth. As for taking a profit in the stock, I have recommended that in the past year when it's moved over 45. I now consider 50 as a price to take at least a partial profit.

Don

7:54

Happy Holidays. Do you have any thoughts on DLR and CCI? Both have come down hard and yield close to 5%. do you see any threat to those dividends?

Roger Conrad

7:54

Hi Don. I think dividends on both are pretty solid. I think Crown Castle is likely to raise its payout at a faster pace, given its cash flow growth is bit more assured. But I rate both buys at current prices. Look for a new REIT Sheet in the next week, as well as the comprehensive coverage universe table.

arthur

7:57

Brookfield. Gentlemen, there are multiple ways to own part of Brookfield. Do you have a favorite? BAM,BEP, BN, BIP. or some of the preferreds, BKAMF. BKFAF. They don't all track the same.

Roger Conrad

7:57

Arthur, the basic difference between the Brookfields is the assets they own. Brookfield Asset Management gives you the opportunity to own a bit of all of them. Brookfield Renewable--which I've answered multiple questions on during this chat--the one I've focused on historically as a contract power producer. It's probably more accurately described now as a renewable energy super major and I think it's basically deep value now.

Victor

8:00

Hello guys and I hope you are having a good Holiday Season. On your last report you had concerns about KMI and next year earnings and their adjustable rates. Would you still buy KMI that is now trading at the dream price?

Roger Conrad

8:00

Hi Victor. As I noted in the most recent Energy and Income Advisor, Kinder Morgan has basically come clear about the impact of rising interest rates on its bottom line next year--mainly from use of variable rate debt. And as they demonstrated, the impact will basically be offset in 2023 by new assets coming on stream. That means variable rate debt is not really a threat to Kinder's price of value proposition and I do continue to recommend the stock as a buy up to 22--with 18 as a Dream Price.

Rather, the risk is with other companies yet to announce guidance. I'm quite confident in what we have in the portfolio. But I did add several names to the Endangered Dividends List--and may add more in coming weeks.

Guest

8:06

Why is TRP getting hammered and is at or near its Dream Buy Price? Thaks for yur and Elliott's onging insightful analyses these many years! Best,

Roger Conrad

8:06

Thank you for those kind words. TC Energy took a hit earlier this month after the company announced an increase in cost estimates for the Coastal GasLink pipeline. Management did not change guidance for 2023 or longer-term and maintains it will cover costs through its asset sales program. I think the selloff we've seen is the product of overall market weakness, the softer Canadian dollar and uncertainty about the Coastal GasLink's ultimate cost, which management has promised to update early next year. There may also be some reaction to the leak on the Keystone XL pipeline. Management expects to announce full Q4 and 2022 results and update guidance in mid-February. And I'll watch carefully what they announce. But this is a large and solid company and I intend to stay with it, particularly as we're still at a very early stage of this energy super cycle. And keep in mind that midstream companies don't make their biggest gains until later in the cycle.

arthur

8:07

Have you had a chance to look at Diversified Energy Company PLC OTCQX International: DECPF https://www.div.energy/ I'd be curious to hear your thoughts, probably way too speculative for your portfolios, but might be worth covering. I have been nibbling at it ever since the WSJ did what I thought was a bit of a hatchet job on the company. It pays a heck of a dividend which the company has been raising over the last four years. Listed on the LSE, it seems to get overlooked. Management seems competent and it has 67,000 gas and oil wells and 17,000 miles of natural gas pipelines.

Roger Conrad

8:07

Thanks Arthur. I will take a look.

robtrhododendron

8:08

Will the switch from AQNU for AQN pass the wash sale test?

Roger Conrad

8:08

They're different securities, so yes they should.

Jeff

8:09

Roger, you have said today that ET is your favorite midstream for 2023. Would you initiate a position now or wait as it seems you think the first quarter / half of the year is going to be tough.

Roger Conrad

8:09

I think now is a good time to initiate a position--incremental investing will ensure you get the most shares at the lowest prices.

Jeff

8:14

Elliott, you stated you see interest rates for the long bonds going down in the near future at investors look for safe havens in the near future. So if you are in your 70's and are looking for safe investment grade income wouldn't putting some money in longer duration bonds make sense. My concern is the investment paying it interest not worried about capital gains or losses. Totally different if I was in my 50's. Agree or disagree. Thanks

Connecting…

Your current subscriptions

None

E-mail Address	Chat Owner	Status	Remove

Enter your email address to be notified when Sherry Roberts hosts a chat