Pipeline Stocks ?

[LakeRat1]

With everything going on in the world today, I am contemplating investing a substantial amount in Pipeline Stocks...... I have been on and off the fence, then seen a news post this morning that got me thinking again ....... Thoughts ?

 

[Surewhitey]

I have had MLP stocks (many pipelines are these). I found the work on the tax filing side a bit confusing and a pain for the additional in dividends you get. I'll likely never buy an MLP in the future for this reason.

my $.02

 

[Montecfo]

I have owned WMB for about 18 months and it has been great. i owned it for years coming out of the financial crisis and it was fabulous. But these are sensitive to oil prices so when they fall so will pipelines, but perhaps not as much as independent producers.

I do not plan to add here. Refiners or integrated oil companies might be a better bet here.

Williams is a C-corp so no k-1.

 

[njhowie]

I believe it's never a good time to invest a substantial amount in any single stock or sector.

The likelihood is that the energy markets are at or near a peak. It is cyclical, always has been, always will be. Maybe you can buy now, and it makes another leg up. However, just be cognizant of the fact that many big names in the sector are up 3, 4, and 5 times where they were only a year or two ago. There is potential for the entire sector to drop 50% once Q3 results are announced in the fall. So, while we will likely see prices remain elevated for the next couple months through the summer, I wouldn't get too comfortable with the situation, or convince yourself that this is a new normal.

 

[VanWinkle]

Well, the secret is out!! Now everyone will be investing in those stocks. Wait, this is not new information so tread carefully before you invest a substantial amount.

 

[LakeRat1]

With Russia loosing out on their LNG export business, I was looking specically at ENLC - I was thinking short term 6month to 2 years

 

[Winemaker]

I have owned various over the years in tax deferred accounts; thus eliminating the K-! issue. Fidelity does do the additional work as trustee to determine tax liabiity; so far so good. Returns for the most part have been pretty good except PAA which got hit pretty hard after a leak in a CA pipeline. They do have some local work here in SW PA.
As an alternative, I also own CEM, a CEF that invests in all the pipelines, yielding close to 6%, no K-1. The performance has been all over in terms of price, but a consistent payer, which is usually return of capital.

 

[LakeRat1]

I have owned various over the years in tax deferred accounts; thus eliminating the K-! issue. Fidelity does do the additional work as trustee to determine tax liabiity; so far so good. Returns for the most part have been pretty good except PAA which got hit pretty hard after a leak in a CA pipeline. They do have some local work here in SW PA.
As an alternative, I also own CEM, a CEF that invests in all the pipelines, yielding close to 6%, no K-1. The performance has been all over in terms of price, but a consistent payer, which is usually return of capital.

Thank You ..... I will research CEM and CEF

 

[Lakedog]

Currently own OKE and KMI which are both C-corps (no K1) as I prefer stay away from MLPs. Bought quite a bit of OKE at $19 during the early 2020 market dip and plan to hold long term for the div. It pays around a 6% div at current share price in the 60s. Have been in and out of KMI a few times and have done well with it but nothing like the gains in OKE due to the nice buying opportunity.

 

[copyright1997reloaded]

With everything going on in the world today, I am contemplating investing a substantial amount in Pipeline Stocks...... I have been on and off the fence, then seen a news post this morning that got me thinking again ....... Thoughts ?

I've owned KMI for a few years. It has almost doubled since the Covid low.

If by "substantial amount" you mean 5%, then maybe. If by substantial amount you mean 50% - no way would I ever do a sector bet of that magnitude.

 

[Winemaker]

Thank You ..... I will research CEM and CEF

In my case, CEF stands for closed end fund, it is is not a ticker symbol.

 

[copyright1997reloaded]

In my case, CEF stands for closed end fund, it is is not a ticker symbol.

And also stands for Sprott Physical Gold and Silver Trust (CEF) which I own.

 

[latexman]

I sold AMLP in my IRA last week. I've owned it about 5 years. Unfortunately, I bought high and AMLP was slowly trending down. Then they did a reverse split and was slowly trending up. With the recent leap in fuel prices, AMLP started trading at about what I had in it (excluding the 8-10% divy, which I have enjoyed ). So, I sold it and kept the cash.

 

[marko]

While only trying to land some higher dividends, late last year I bought ENB (enbridge) +18% YTD, OKE and WMB +47% YTD. They've all delivered admirably, all with 5% dividends or more.

At the same time I also bought XOM +57% YTD (and MO) which have really outperformed.

Of course, let's not talk about some of the really bad calls I've made, otherwise you'd not be impressed with my brilliance!.

 

[ncbill]

Anything related to oil/gas depends on correct market timing.

Buy before their prices soar and you'll look like a genius.

Buy back when oil was over $100/bbl then went to $25/bbl and you'll curse yourself forever.

 

[Koolau]

Is anyone taking into account the political climate? Not trying to summon the pig, but I would be concerned about investing in any business in which a stroke of a pen can change the business model. YMMV

 

[Phroig]

Is anyone taking into account the political climate? Not trying to summon the pig, but I would be concerned about investing in any business in which a stroke of a pen can change the business model. YMMV

I don’t see this happening here, but the UK just proposed a 25% windfall tax on O&G profits.

 

[Koolau]

I don’t see this happening here, but the UK just proposed a 25% windfall tax on O&G profits.

Some of the recent rhetoric would suggest such could be brewing, but there are still some cooler heads in the USA that realize O&G is a cyclical business. Profits go from non-existent to "excessive" over short spans of time (and back again.) No one cries for the O&G industry when oil drops to $30 and profits dry up and drilling companies go out of business. But when the next cycle comes along, O&G gets accused of gouging. I don't think I want to invest in individual plays in such a business environment but, of course, I'm "all in" in my MFs. YMMV

 

[Montecfo]

I do not think political action against O&G is plausible in the US at present.

The international landscape is another story. China is now easing lockdowns, which increases demand. EU embargo on Russian oil may reduce supply.

The US dollar weakening pushes pricing higher and we are in summer driving season.

 

[MichaelB]

The US$ is not weakening, and that is a big problem for the US and the rest of the world. Petroleum prices in Europe have risen much more because the Euro has lost value. Here are 2 charts showing the US$ over 5 years.

 

[Koolau]

The US$ is not weakening, and that is a big problem for the US and the rest of the world. Petroleum prices in Europe have risen much more because the Euro has lost value. Here are 2 charts showing the US$ over 5 years.

I can see why a weakened Euro is bad for Europe but why would a strong dollar be bad for the USA? If we want to import oil, strong dollars should buy more for less (or am I thinking backwards as usual?)

 

[Montecfo]

The US$ is not weakening, and that is a big problem for the US and the rest of the world. Petroleum prices in Europe have risen much more because the Euro has lost value. Here are 2 charts showing the US$ over 5 years.

The USD index is down about 3 pct. over the past week or so. That is measuring the dollar against a basket of foreign currencies, not any single currency.

Trend can change but that is what I was referring to.

The Euro is even weaker, but that is a different matter.

 

[MichaelB]

The USD index is down about 3 pct. over the past week or so. That is measuring the dollar against a basket of foreign currencies, not any single currency.

Trend can change but that is what I was referring to.

The Euro is even weaker, but that is a different matter.

True, the US$ has weakened over the past week, but it is still higher YTD and over the past year, and also quite strong, compared with performance over the past decade. Despite media reports, the US economy is currently quite strong, and the Eurozone is not, so we would not expect to see the US$ continue to decline. Probably the opposite will happen.

YTD charts attached.

 

[Montecfo]

True, the US$ has weakened over the past week, but it is still higher YTD and over the past year, and also quite strong, compared with performance over the past decade.

Nothing to disagree about here. Weakening USD (if it continues) will drive oil prices higher and tend to benefit oil stocks including pipelines.

 

[MichaelB]

I can see why a weakened Euro is bad for Europe but why would a strong dollar be bad for the USA? If we want to import oil, strong dollars should buy more for less (or am I thinking backwards as usual?)

Well, the US is a net exporter of petroleum products. We export more petroleum value than we import. See the attached chart, from the US EIA (here) We may soon shift to a net importer, but this depends on whether domestic producers increase investments, which they have been reluctant to do.

A weaker Euro (and Yen, Swiss Franc, Taiwan $, etc) and stronger US$ basically moves jobs from the US to the Euro area. Another way to see it is they produce more than they consume, and therefore export their unemployment to us. We have only two options. One is to let our unemployment rise, the other is to incur a deficit to absorb the excess supply without reducing our own production.

This is what led to the financial imbalances of the ‘00 to ‘08 period, which in turn led to the financial crisis of ‘08. The imbalances are unhealthy for the whole world. A healthy loss of value of the US$ (trade weighted) would benefit the whole world, because it would reduce the trade imbalances. It’s not likely to happen easily, however, because the US is the only major developed economy that does not manage its value globally.