Posts: 1,530
Threads: 172
Joined: Mar 2013
Reputation:
24
(12-09-2014, 01:39 AM)EricL Wrote: (12-09-2014, 12:13 AM)earthtodan Wrote: I was in it, captivated by the yield, but I've since "diversified" into other offshore drillers.
On the bright side, the more the prices of these companies shrink, the less they are as a percentage of my portfolio.
There's always a silver lining isn't there. 
Lol! And just think how much more simple it will be when all of our holdings go bankrupt -- no more tracking to do, no more checks to cash.
Posts: 187
Threads: 14
Joined: Mar 2014
Reputation:
1
(12-09-2014, 06:02 PM)Kerim Wrote: (12-09-2014, 01:39 AM)EricL Wrote: (12-09-2014, 12:13 AM)earthtodan Wrote: I was in it, captivated by the yield, but I've since "diversified" into other offshore drillers.
On the bright side, the more the prices of these companies shrink, the less they are as a percentage of my portfolio.
There's always a silver lining isn't there.
Lol! And just think how much more simple it will be when all of our holdings go bankrupt -- no more tracking to do, no more checks to cash.
Very good point Earthtodan.
Kerim, bite your tongue, do you really want to start over??
Posts: 583
Threads: 62
Joined: Sep 2013
Reputation:
16
I exited SDRL when the rig market started to show signs of saturation and when rig lease rates started dropping. This past Friday, I assessed the risk reward as worth a nibble and bought a few shares of SDRL $11.06, ESV at $27.27, and OIH at $34.29. Earlier shares of PSCE were bought for $26.65. It holds a mix of energy related stocks including several service companies. Now I'll just hold on to the seat of my pants and mostly wait, but will continue to slowly accumulate on additional weakness. Hopefully cash will last until capitulation takes place.
Alex
Posts: 576
Threads: 21
Joined: May 2014
Reputation:
11
(12-15-2014, 08:53 AM)hendi_alex Wrote: I assessed the risk reward as worth a nibble and bought a few shares of SDRL $11.06
As a pure growth / value position? They cut the dividend to 0%
Posts: 583
Threads: 62
Joined: Sep 2013
Reputation:
16
12-15-2014, 11:34 AM
(This post was last modified: 12-15-2014, 12:41 PM by hendi_alex.)
Very few businesses that pay out the majority of cash flow are ever growth plays (perhaps some property REITs and some MLPs are exceptions). For most however, dividends are not something that continuously grow. They adjust the dividend based upon free cash flow that is available to share holders. So a dividend cut or elimination is nothing new to these kinds of operations. If SDRL survives, it will begin to pay out cash flow as dividends once again. An investor should not pay much attention to yield or to dividend growth with any of these kinds of businesses. The dividends are transient, and just because there is steady dividend growth over a period of several years of good business climate, that doesn't imply that the dividends will not get cut or eliminated when the business climate weakens. In fact that is almost a certainty.
So I'm buying into the energy sector as a value play, with the assumption that when dividends resume, the positions will kick out significant cash flow. OIH has been bought as more of a value/recovery play and will likely be sold if the price recovers to perhaps 80% of yearly highs.
Last year, I bought TNK at two dollars and change because fundamentals of the shipping industry were improving. Since then shares have surged to almost $6. The dividend has not been increased yet because the company is using the extra cash flow from strong day rates to pay down debt and better position the company. When they are satisfied with that process, dividends will sky rocket until the sector once again get flooded with excess capacity. That kind of cycle is always true with these kinds of investments. The trick is to pick survivors, as many fail to b.k. during the down cycles. IMO most of the potential plays represented in this diverse group are not compatible with DG investing, but should played or viewed as being outside of that portfolio.
Alex
Posts: 2,411
Threads: 54
Joined: Jul 2013
Reputation:
34
(12-15-2014, 11:34 AM)hendi_alex Wrote: Very few businesses that pay out the majority of cash flow are ever growth plays (perhaps some property REITs and some MLPs are exceptions). For most however, dividends are not something that continuously grow. They adjust the dividend based up free cash flow that is available to share holders. So a dividend cut or elimination is nothing new to these kinds of operations. If SDRL survives, it will begin to pay out cash flow as dividends once again. An investor should not pay much attention to yield or to dividend growth with any of these kinds of businesses. The dividends are transient, and just because there is steady dividend growth over a period of several years of good business climate, that doesn't imply that the dividends will not get cut or eliminated when the business climate weakens. In fact that is almost a certainty.
So I'm buying into the energy sector as a value play, with the assumption that when dividends resume, the positions will kick out significant cash flow. OIH has been bought as more of a value/recovery play and will likely be sold if the price recovers to perhaps 80% of yearly highs.
Last year, I bought TNK at two dollars and change because fundamentals of the shipping industry were improving. Since then shares have surged to almost $6. The dividend has not been increased yet because the company is using the extra cash flow from strong day rates to pay down debt and better position the company. When they are satisfied with that process, dividends will sky rocket until the sector once again get flooded with excess capacity. That kind of cycle is always true with these kinds of investments. The trick is to pick survivors, as many fail to b.k. during the down cycles. IMO most of the potential plays represented in this diverse group are not compatible with DG investing, but should played or viewed as being outside of that portfolio.
I'd be careful in assuming that SDRL has any meaningful dividend in the next couple years. Case in point are some of the dry bulk shipping stocks that were riding high prior to the Great Recession and paying tremendous dividends. They were all cut during the washout and few if any have reinstated dividends, let alone returned them to previous levels.
Why not play it with the integrated companies that are paying 4-5% at current levels rather than speculating on a rebound from the deep sea drillers? I'll take my chances with an A or AA rated COP, OXY or CVX paying 4%+ rather than taking my chances with a highly indebted SDRL on hopes that oil will return to $100 levels anytime soon.
Posts: 576
Threads: 21
Joined: May 2014
Reputation:
11
(12-15-2014, 11:57 AM)EricL Wrote: Why not play it with the integrated companies that are paying 4-5% at current levels rather than speculating on a rebound from the deep sea drillers? I'll take my chances with an A or AA rated COP, OXY or CVX paying 4%+ rather than taking my chances with a highly indebted SDRL on hopes that oil will return to $100 levels anytime soon.
Exactly. It's not like SDRL is going to jump back into the dividend paying game and immediately yield 8%.
Posts: 583
Threads: 62
Joined: Sep 2013
Reputation:
16
Why not choose from a diverse mix in the energy sector? By choosing from COP. OXY, or CVX you are limiting the investment only to big integrated companies. I prefer to add broader exposure plus would like to include some small and mid cap exposure. My SDRL shares just represent about 1.5% of the overall energy play. The biggest positions are COP, TNK, KMI. My two individual picks in the rig lease area are ESV and SDRL. I consider SDRL to give the greater risk as well as the greater potential gain but the weighting is only 1/3 that of ESV which has a much healthier balance sheet.
Alex
Posts: 2,411
Threads: 54
Joined: Jul 2013
Reputation:
34
(12-15-2014, 12:49 PM)hendi_alex Wrote: Why not choose from a diverse mix in the energy sector? By choosing from COP. OXY, or CVX you are limiting the investment only to big integrated companies. I prefer to add broader exposure plus would like to include some small and mid cap exposure. My SDRL shares just represent about 1.5% of the overall energy play. The biggest positions are COP, TNK, KMI. My two individual picks in the rig lease area are ESV and SDRL. I consider SDRL to give the greater risk as well as the greater potential gain but the weighting is only 1/3 that of ESV which has a much healthier balance sheet.
That makes sense, I agree with your thoughts on ESV vs. SDRL.
Some of the Bakken names likes CLR, WLL and OAS are down huge as well. They don't pay dividends but are the bigger players in the basin and could be great spec. plays once oil turns back around.
Posts: 583
Threads: 62
Joined: Sep 2013
Reputation:
16
To the main main thing is to not accumulate too aggressively. The calls are all over the map, even for as low as under $40 oil. While I don't think that this situation can stay so extremely depressed for very long, the market has the capacity to stay irrational far longer. I just added a small increment of MRO at $24.70. Next stop for me, it it hits, is $22.25. Hopefully available funds last past the eventual bottom.
Alex
|
