JotCast | 3/30/22 Capitalist Times Live Chat

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3/30/22 Capitalist Times Live Chat

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Roger Conrad

5:45

We think there are good things in store for Pioneer, as well as EOG and Devon. Otherwise, we would have advised exiting the position entirely. But even great stocks can get overextended and this one has climbed a lot in a big hurry. You've realized a bigger gain by not trimming when we did. But I also see the CEO just sold a big block of shares to cash in on the higher share price.

Andrew

5:48

I don't think you cover Alpine (PINE) in the REIT sheet, but I'd like your thoughts on this small triple net lease REIT. They're yield is north of 5% and they're small enough that they don't need multiple billion dollar deals like Reality Income (O) does to move the needle. I'm not afraid of a bit of risk, and I like the idea of getting into a REIT that is small enough to good growth prospects, but does this one tick any of your red flags?

Roger Conrad

5:48

Thanks Andrew. I'll put it on the list. I do think there are definite advantages of scale in the property business--and with commodity prices, labor costs etc rising so sharply, we might see that become a lot more important with returns on new development. I will looks at this one more closely per your suggestion--and I see Q1 results are due out in late April. It's also noteworthy that almost everyone who covers this REIT is bullish and insiders have been steady buyers. I don't have an opinion for you now but from a cursory look it seems pretty solid and a good REIT Sheet candidate.

Andrew

5:56

I see a lot of LNG questions, but I don't think anyone has asked about Tellurian Inc (TELZ). I know this is highly speculative, they don't have any terminals up and running (I'm not sure they've even broken ground yet on any), but given the new focus on LNG, is this an early stage Cheniere (CQP) in the making? Or are we better off avoiding?

Roger Conrad

5:56

This isn't one we currently track in Energy and Income Advisor. Generally speaking, we favor companies in this business that have operating projects and earnings. For one thing, it's hugely capital intensive and does not favor players that aren't already big companies. It''s not surprising the stock would gain interest given what's happened in global energy markets. But LNG is a massive and complex business even when you have operating terminals. And a company that's never had real earnings--let alone paid a dividend--is in our view better just watched for now.

Hilary

6:04

Hello Roger, and thank you for taking the time to do these chats. I've been with you for a very long time, but I lost access to your advice on a few of the Canadian stocks bought all those many years ago. Can you please give me any advice you might have on BIRD, IBI Group and INGXF? I know you cover these in another of your newsletters, but as I am already a bit overweight in Energy I am not sure that subscribing to this is the best investment focus for me as I try to build a diversified portfolio. I already subscribe to CUI+ as well as The Reit Sheet. Is there any other place you follow these companies?

Roger Conrad

6:04

We track Bird Construction in our Canada/Australia coverage universe in Energy and Income Advisor. Innergex is in the Utility Report Card of Conrad's Utility Investor. I have not looked at IBI Group for some time--has not paid a dividend since 2013. The company appears to be chugging along, expanding its architectural franchise and is basically trading where it did when it was an income trust. The lack of yield limits the attraction in my view. But the company looks solid. Same with Bird and Innergex, though both of them do pay dividends. Bird is getting a lift from the comeback of Canada's energy patch. Innergex had some growing pains but looks like its back on track.

Andrew

6:07

Last one from me - CrossAmerica Partners (CAPL). First, in the last issue you have a buy under price of <20, but at the end of the write up you have in bold buy <22. Clearly one is a typo, but which one? Second, you mentioned swapping it for Sunoco, LP based on your hope they might resume dividend growth. The way it was written, that suggests you don't see much chance of CAPL resuming growth any time soon? Is that accurate? It sounds from the write up that CAPL is pretty solid financially and doing well. Are there any other reasons for a possible swap other than the possibility Sunoco might resume div. growth? Are all things reasonably equal?

Thanks again for taking the time to answer my questions. These chat are worth subscribing to all by themselves.

Roger Conrad

6:07

That's pretty much as I see it. The current dividend-which is pretty high--is well covered by cash flow and appears safe. But it doesn't look much like the GP is inclined to increase it, even with recent asset growth. I think that will likely cap the price in the near term. Sunoco hasn't raised its payout either lately, which probably caps its upside. I think they're kind of on equal ground at this point. The big issue is if higher fuel costs reduce gasoline demand--no sign of that from trips I've taken this year. But it is something to watch. The highest recommended entry point is 22.

Roger Conrad

6:08

Thanks for all those questions Andrew

Andrew

6:12

Sorry, I lied, one more (seriously, the last) Hess Midstream (HESM) I'm confused by the price action today. Yes they sold 7.9 million shares, but they retired 12.65 they bought from their parent. So the transaction will, as they said in the press release, be accretive because they are retiring a net 4.75 million shares. (I think they said it would be accretive 5%). That sounds like a damn good deal for shareholders, but the market is pricing it like this is dilutive. Any thoughts on why?

Roger Conrad

6:12

It's almost comical how investors overreact to when companies issue shares. In this case, it came at the same time Moody's raised Hess Midstream's credit rating to Ba1--so obviously this is a positive for the balance sheet. But as you point out, there's no dilution either. In any case, this is a well run midstream company as demonstrated last month by robust Q4 results and guidance. It needs a real volumes recovery to score big gains like all midstream stocks. But it is up 12% this year to date on top of 51% last year--so things are moving in the right direction. Thanks again for your questions.

6:13

You have UNP on the CUI report card. I would love it if you would add the other railroads that service the US.

Roger Conrad

6:13

Thanks for the suggestion Al. I have covered them as a sector in Capitalist Times--our broad based publication. Generally, I believe they have utility characteristics but are a little pricey now.

6:15

Do you have any plans to add them? If not , do you know of any ETFs or funds that are exclusively US railroads?

Roger Conrad

6:15

There are ETFs that focus on just about anything including transports. I don't have any to recommend you today. But generally speaking I prefer individual stocks, even in railroads which are broadly similar. And if you do find a transportation ETF, make sure you find out what's inside before investing. Otherwise you might wind up holding a lot of things you might not want to.

James

6:17

Do you have any recommendations for protecting against inflation over the next few years that are low to zero risk? I heard about I Bonds from the US Treasury which are great, but are limited to 10K per person.

Roger Conrad

6:17

I would never characterize anything as zero risk. Those I Bonds do protect against a lot of things. But for the most part, when you try to zero out risk, you're going to do the same thing to prospective returns. I would rather own stock in a mining company like Newmont (NYSE: NEM), for example, which is a direct beneficiary of inflation.

Dave

6:20

what do you recommend for the spin off WBD shares? Do we need to do anything? Hold? Sell?

Roger Conrad

6:20

If you're referring to the prospective AT&T spinoff, my view is still that the sum of the post-split parts is going to ultimately be worth 35-40% more than the current price of AT&T. My view is we just want to hold through the spin, wait for the dust to clear and then make a decision on what to do. What we do know is both parts of the company are growing revenue and are healthy--and remaining AT&T's dividend is a safe 6% plus (with room to grow) based on the value of 0.24 shares of DISCA. Let's hold it for now.

James

6:21

Do you have any opinion on MOS and/or the industry at this point in the cycle? MOS has had a great run up and I'm wondering if I should get out or if this is just the beginning of a big run like we had in 2008 when MOS went to $163.

Elliott Gue

6:21

Generally, we've been bullish on the US fertilizer companies, especially MOS and CF. They benefit from rising ag prices and, particularly for nitrogen fert. and CF, low US natgas prices. Nitrogen is produced generally by using natural gas to produce ammonia NH3. We're not recommending either stock right now, but I'm looking to add it to one of the model portfolios I manage if we get something of a dip. I do believe the current rally in Ag prices is part of a super-cycle rather than just a short-term weather driven spike.

Dave

6:21

Follow on - WBD versus Comcast, etc.?

Roger Conrad

6:21

Comcast is a much higher quality play in the communications sector with entertainment assets as well as high value networks. It's also substantially underpriced at current levels.

Jeff

6:24

Roger, just my two cents on Tellurian. What has my interest peaked is that Charif Suki is the CEO. He is the person that started Cheniere. He was forced out of Cheniere by Ican. He states they have all the financing and will be breaking ground soon. I think the bet is on him.

Roger Conrad

6:24

I think if you don't mind the lack of dividend and can afford the risk capital it might be a good shot. There's just a great deal of competition now for land, labor and capital that wasn't there when Cheniere started out. A lot of much bigger players that the game much harder for a small company without earnings or a credit rating to win, despite the obvious market for US LNG. Thanks for sharing your views.

Jeff B

6:27

What is your opinion of BHP, RIO, and CLF. I own RIO and CLF, both have gone up and RIO pays a big dividend.

Roger Conrad

6:27

We like RIO and BHP. BHP is the one we hold in the CUI Plus portfolio, mainly because it pays such a nice dividend. But RIO could also fit there. Cleveland Cliffs is a somewhat different story as its not really an extraction company--also pays no dividend. But it's a potential beneficiary of reshoring manufacturing in the US and Russia sanctions make it more competitive. There's no yield and the stock is up a lot in the last 12 months (86% plus) which is a turn off generally for me. But its in a good business. Look for more on the metals in the next Capitalist Times issue. If you're not familiar with that advisory, call Sherry at 1-877-302-0749.

Lee

6:29

Mark Fisher just on with quite bullish opinion on nat gas. DMLP might be a pure play on natty, since much of its production is gas. Also Dorchester has always had a variable dividend/distribution. Do you think you guys might add DMLP to your coverage?

Roger Conrad

6:29

Hi Lee. We actually do cover Dorchester in our MLPs/Midstream coverage universe in Energy and Income Advisor. The current advice is a buy at 25 or lower. I think you have the right idea on these and variable dividends are a good way to go the few years on gas plays. Thanks for the suggestion.

Jack A.

6:30

This is a comment and not a question: I want to thank you guys for your unbelievable calls recently........ For example, suggesting that we take some money off the table in OXY and PXD, and add to our position in Valero was timed perfectly..... Also, telling us to be patient with the MLP pipelines seem to be paying off recently... You guys really seem to know your stuff..... Keep up the great work...... Thank you!

Roger Conrad

6:30

Thank you Jack. We really appreciate it.

Jeff

6:32

Iwould like to know your opinion on CIVI

Roger Conrad

6:32

It looks interesting--small producer paying special dividends. We don't have an opinion for you today on the company itself as it's not in the coverage universe. But we are generally favorably inclined toward this type of stock and we will put it on the list to consider. Thanks for the suggestion.

John A

6:36

Do you have an opinion on SRUUF which is currently near its all-time high which presumably reflects the recent move in the uranium spot price? If so, do you think it is less risky than CCJ or other uranium related stocks? Thank you.

Roger Conrad

6:36

Generally speaking, we prefer to own actual mining companies to the pure element and that holds true for uranium as well, especially after the recent price spike. Mining stocks offer greater upside leverage to the price. They may also be a less risky way to play, since companies can offset drops in the commodity on the cost side. And Cameco also pays a dividend they just raised by 50% to reflect the higher uranium price.

Gary

6:40

You are currently recommending selling Antero Midstream. I have checked their recent presentations and they have restructured their balance sheet, received multiple debt upgrades, aggressively paying down dept and have good coverage ratio for their dividend. With such a good dividend is AM now clear to buy.

Roger Conrad

6:40

Hi Gary. Antero has done all of that. On the other hand, distribution coverage is still quite thin and they are wholly dependent on a single customer, parent Antero Resources (NYSE: AR)--which has also done some pretty dramatic restructuring to stay solvent in recent years. I think the energy cycle is on their side for the first time really since early in the previous decade. But there are multiple other midstream companies that have far greater scale, financial power and diversification by customers and operations--i.e.,a lot less risk. Why take the risk of owning Antero yielding 8% when you can own MPLX yielding more and actually increasing its payout reliably.

Chris.

6:46

Do you cover BLE or BTZ? I have a 1k shares of each and it’s been trending down. Hold? Sell?

Roger Conrad

6:46

We do not cover either. I see BLE has cut its monthly dividend to 5.2 cents from 6.2 cents the previous month, which may explain some of the action. Also the muni bond market has been weak, as has the bond market in general. That's hurt both Blackrock Municipal Income Trust (BLE) and Blackrock Credit Allocation (BTZ), which holds a larger assortment of debt. These funds are also hurt a lot more than, for example, Vanguard Tax-Exempt Intermediate Term (VWITX) when bonds retreat--in large part because they're leveraged. I wish I could tell you where these funds bottom. But as I said earlier in the chat, I did cut our bond exposure in the managed CUI Plus portfolio quite substantially earlier this year--even though it is in the very safe VWITX. So I think anyone owning these funds for the yield now should be prepared for more declines as the Fed tries to get a handle on inflation, without setting off a recession.

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