President Trump signed executive orders last week, clearing the path for the controversial Keystone XL and Dakota Access Oil pipelines as he moves to expand energy infrastructure in the U.S. The Trump administration is a pro-energy one with former Exxon Mobil CEO Rex Tillerson appointed as Secretary of State and Rick Perry for Department of Energy. Perry was on the Board of Energy Transfer Partners which owns the Dakota Access Pipeline. Trump has frequently mentioned the need for energy infrastructure investments and developing domestic natural resources. The new president has also signed an executive order directing the Commerce Department to develop a plan that requires all new pipelines built on U.S. terrain must use ‘United States Steel’. For these reasons, we believe the oil and gas industry is well-positioned in the months ahead as the roadblocks placed by the previous regime have been removed and construction has been given the green light.
We expect President Trump to intimidate a dovish Federal Reserve for QE4, after all who is going to pay for these energy projects? This will be bullish for commodities in general. We like a number of companies and Master limited Partnerships in the Energy Space as they seek to take advantage of the current less regulated environment. U.S. oil and gas producers came out on top versus OPEC in the recent price war as the U.S. became one of the lowest cost producers of hydrocarbon as a result of technological improvements in drilling.
Our initial purchase in the energy sector was the Energy Select Sector ETF which is a non-diversified basket of energy companies that operate in oil, gas and consumable fuels, energy equipment and services and includes major heavyweights such as Exxon Mobil, Chevron, Schlumberger Ltd and EOG Resources. We bought this ETF on 6 March 2016 and have made a 17.55% gain. This ETF offers a 2.55% yield. Next up was Pioneer Natural Resources Co. (PXD) which operates as an independent oil and gas exploration and production company in the U.S. PXD produces and sells oil, natural gas liquids and gas. We purchased PXD on 30 March 2016 and the stock has returned 28.93% to our clients since then. PXD pays a small dividend of 0.04 cents per share.
On 11 May 2016 we went long on Spectra Energy Corp (SE). SE is a Fortune 500 company based out of Houston, Texas that operates in the natural gas industry. Spectra owns one of the largest pipeline systems in the U.S., the Texas Eastern pipeline along with three other pipelines. SE has been a big winner for our clients in the energy space posting gains of 37.32% since 11 May, 2016. Investors also get paid to hold the stock with a 4.23% yield. Valero Energy (VLO) is a Fortune 500 International manufacturer and marketer of transportation fuels, other petrochemical products and power. VLO joined our list of energy purchases on 9 August 2016 and we have earned 23.88% gains. VLO pays a 3.57% dividend.
And last but not least, Cone Midstream Partners LP (CNNX). CNNX is a growth -oriented master limited partnership which owns, operates, develops and acquires natural gas and other midstream energy assets in the Marcellus Shale in Pennsylvania and West Virginia. MLP’s offer us diversity as they get paid for transporting chemicals and in times of commodity price risk, they still get paid. They combine capital appreciation potential with cash-flow income of a steady quarterly yield. We went long CNNX on 14 November 2016 and it has posted a 22.97% profit thus far while also paying a 4.56% yield.
All of our energy positions are in intermediate and long-term uptrends and we will continue to hold them until the trend eventually turns to bank the profit. One of the criteria’s we use for selecting individual stock’s/ETF’s or MLP’s is we look at whether there is both new and existing institutional money being invested in the position among other fundamental criteria. In other words we follow the ‘Smart’ money. Of course, it’s all well and good hearing about these gains now but what about what we are looking at buying in the coming weeks and months? We will be in Sao Paulo 9-30 March discussing the next line of equities on our horizon with clients as they continue to make money in the markets. Take a look at our current portfolio and see for yourself what we can do for you: portfolio-02-02-2017