24/7 Wall St. had the following to say
With the coming Fiscal Cliff taking the dividend and capital gains taxes higher, investors are hearing of more and more dividends coming sooner or as special dividends before the end of 2012. With dividend taxes at only 15% as of now, it is likely that these tax rates will never be lower. Companies are starting to accelerate and boost those after-tax returns to holders as a result.
Valero Energy Co. (VLO) traded at $31.90 and has a market value of about $17.6 billion. The consensus target price from Thomson Reuters is $38.53 and the 52-week range is $17.77 to $34.66. Valero has a dividend yield of 2.2%. The implied upside to the consensus target is 21%, and the target price is well above the 52-week high.
Marathon Petroleum Corp. (MPC) traded at $54.80 and has a market value of about $18.5 billion. The consensus target price from Thomson Reuters is $62.36 and the 52-week range is $28.53 to $56.22. Marathon has a dividend yield of 2.5%. The implied upside to the consensus target is 14%, and again the target price is above the 52-week high.
Phillips 66 (PSX) traded at $45.20 and has a market value of about $28.3 billion. The consensus target price from Thomson Reuters is $50.64 and the post-IPO range is $28.75 to $48.22. Phillips 66 has a dividend yield of 1.7%. The implied upside to the consensus target is 12%, and the target price is above the 52-week high.
Velero (VLO) is up ~50% YTD, and up 84% for 1yr. Despite this excellent run the stock is down ~53% over a 5yr period, for reference the S&P500 is down 5% for the same period.
Marathon (MPC) is up 64% YTD, and up 100% for 1yr period. Since July 2011 (when Marathon Oil split upstream and downstream into separate companies) the stock is up ~46%.
Phillips 66 (PSX) is up more than 37% since being spun off from ConocoPhillips (COP)
Historically, lower oil prices have helped the refiners margins. At the time of this blog oil is trading down to $88, well off of its 2012 highs. If you believe this trend will continue, then there could be even bigger profits to be made on these refining stocks. Further more the 2.5% - 1.7% dividend these three refiners are paying is attractive in this time of ultra-low interest rates.
There are many other players out there too. Tesoro Corp. (TSO) appears in almost all articles pertaining to the top refiners, it has had an excellent run, up over 133% for 1yr period. HollyFrontier (HFC) is up over 55% for 1yr period, and carries a 1.5% dividend. Of course there are always the major integrated oil companies, but they may be hurting on the upstream side to make gains on the refining margins.
Petrobras Aims to Sell Gulf of Mexico Assets October 3, 2012 by Paul Ausick
The CEO of Petroleo Brasileiro S.A. (PBR), or Petrobras, says the company is “very near to closing a deal” for the sale of some $6 billion worth of assets in the Gulf of Mexico. The company is in talks with three potential buyers, according to a report in the Financial Times.
The Gulf of Mexico assets are part of a planned divestment of about $14.5 billion in the company’s assets as it seeks to cut costs and maintain the vast investment it needs to make to develop its fields offshore of Brazil.
For a sale of that size, Petrobras will need a deep-pocketed buyer. Reports on Brazilian TV have indicated that the usual suspects are lined up: Royal Dutch Shell PLC (RDS-A), Exxon Mobil Corp. (XOM), Chevron Corp. (CVX) and BP PLC (BP).
BP, which is in the processing of shedding assets itself, is not a likely buyer, but we could see an offer come in from a Chinese company. For that to happen, a lot depends on the success of CNOOC Ltd.’s (CEO) $15.1 billion bid to acquire Nexen Corp. (NXY). Around 10% of Nexen’s assets are located in the United States, which requires that the U.S. give its approval for the deal. That is not a slam-dunk.
It is easy to imagine that Petrobras would be unwilling to entertain an offer from a Chinese oil company if the CNOOC-Nexen deal is scrubbed. Chinese firms may even decide not to make an offer. And even if that deal goes through, the next deal that would put more U.S.-based assets in Chinese hands might have a very slim chance of success.
Since the ETF was just launched in February, the market cap is very small. I chose to invest in DVYE rather than DEM, there is not a huge difference in the two, and recent charts show they move together closely. The Wisdom Tree fund (DEM) charges an 0.63% management fee, while the iShares fund (DVYE) charges 0.49%. Not a huge difference, but if this is a fund you plan to hold for the long-term this can add up.
Typically a smaller fund adds a fair amount of risk as they get everything up and running, as well as the risk of the fund not making it (or having the plug pulled). In this case I think iShares is committed to this fund, and I expect it will have substantial growth in net assets.
I chose this fund, and fund category, after looking at my US market dividend stocks and related funds. The growth in this area has been strong, and i wondered if these stocks and funds had all reached the end of their runs. This led me to look overseas at similar funds. Either fund should be a good play on both emerging markets, and the trend of growth in dividend stocks.
What really peaks my interest here is the geothermal heat pumps. Green building is more than just a trend or buzzword, companies are seeing that they can save real money over time by "going green". Climatemaster, a division of LSB Industries, has been seeking certifications that will help make its products Energy Star qualified. Achieving these types of certifications might be key to expanding the market for geothermal heat pumps (GHP).
I believe that LSB can lean on its profitable chemical business while it continues to position itself well for potential growth in the geothermal products market. The stock suffered a sell off after an issue at one of its chemical plants. A quick glance shows a P/E of about 13.5, which for a small-cap growth play is quite low. The company has $724M in sales, and that number should be growing.
The stock currently carries a $50 price target, and beat its last earnings estimates by 20%. I think this stock could be a sleeper with some good upside potential. I'm not sure that its a multi-year hold, but lets see where it is in 6 to 12 months.
During this time I never walked away from the market fully, but I certainly did not have the time to look for new plays. The few moves that I did make, I stuck to my strategy of picking up preferred shares in stable companies. I also did not adjust any of my retirement accounts. Now its time to make some adjustments and look for new plays.
The market for preferred shares, and dividend stocks in general, has been really hot. This has limited the number of good opportunities that are out there. I did seize that run up to sell off Altria Group (MO), which is something I never thought I would do. At the end of the day I was up over 40% not counting several good years of dividends. I also unloaded Chevron (CVX) and re-bought, then unloaded again.
Over the past week I picked up two small-cap companies I think have a pretty good shot at substantial growth. The first is SolarWinds Inc (SWI), which is a software company. They call it IT Management and Performance monitoring software. This is a tough market space, and the competition is very strong. Smaller software companies have to work very hard to carve out niche markets. What I think these guys have working in their favor is that software and network monitoring, in a dashboard style, is really a hot area right now. They might be able to use that to their advantage to win some contracts.
The other possibility here is that these guys are able to innovate at a level that makes them a take over target. IBM, CISCO, and other big players in the IT market like to acquire these kinds of companies if they feel that the product can be used to improve their current offerings. Often times it can be cheaper for them to buy a software company than for their in-house folks to develop a competitive tool.
I fell like SolarWinds (SWI) has a reasonable shot at success over the next 12 - 18 months. A lot of their success will ride on corporate IT spending, which I have to admit I do not expect to see growing. There have been a lot of recent articles and studies citing stagnant IT spend. It is clear that internal IT has become a commodity, and that means you can buy it from anyone, and shop based on cost. This could be good for SolarWinds if they are able to undercut the competition on cost.
The company ranked fifth on Forbes "Americas Best Small Companies" list. Average return on equity of 67% over the past five years was tops among all companies on list.
They build this list by looking at Thomson Reuters consensus data. They select the stocks with the highest gap between current price and consensus price, thus showing the most upside potential.
Here are the cliff notes of their report:
Alcoa, Inc. (AA) closed out 2011 at $8.65, leaving an implied price target gain of 44.2% to the $12.48 consensus price target.
Bank of America Corporation (BAC) at $5.56, it has an implied upside of what is truly unbelievable at 72.3% to the $9.58 target.
Caterpillar Inc. (CAT) the consensus Thomson Reuters price targets of $114.50 implies an upside of 26.3% and the dividend is about 2%.
J.P. Morgan Chase & Co. (JPM) at $33.25, there is an implied upside of 39.3% to the $46.33 price target from Thomson Reuters.
United Technologies Corporation (UTX) is shown to have 21.5% upside from the current $73.09 price to a target of $88.79.
