NextEra Energy has a very attractive long-term growth profile. But it’s quite vulnerable to a selloff if the sky-high expectations baked into the share price are punctured. One good alternative is its NextEra Energy Partners (NYSE: NEP) unit. The dividend is two percentage points higher with an identical PG&E bankruptcy-proof long-term growth rate.
For the broader market, we’ve long followed a concept we call the “volatility smile.” Simply put, broader stock market volatility is high early in the stages of a bull market, falls to low levels in the middle of a major rally and then rises again in the latter stages of a bull market. And, of course, volatility usually rises sharply during a bear market.
The recent upsurge in commodity prices and early signs of a pick-up in inflationary pressure could indicate that the bull market has entered its latter stages. However, until market leadership narrows or our favorite forward-looking economic indicators exhibit signs of deterioration, we’re inclined to regard dips as opportunities on the long side.
Access to relatively inexpensive sensor content, data storage, processing power and high-capacity telecom networks has enabled a new era of machine-to-machine communication that can unlock significant efficiencies for industries rooted in the physical world. The rollout of 5G communications networks over the next few years will enhance remote monitoring and other long-distance IOT functionalities.
We understand investors’ pessimism toward MLPs. Including distributions, the Alerian MLP Index has performed poorly this year. Although sentiment toward midstream MLPs remains weak, the doom and gloom gives savvy investors an opportunity to lock in above-average yields on high-quality names that stand to benefit as US onshore oil and gas production takes market share over time.
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