Even in a bull market that’s gone this high for this long, value and opportunity can be found. Here are two energy companies that offer strong businesses but haven’t yet convinced other investors of their full worth.
Energy politics aren’t just a US phenomenon affecting US people and companies. These Canadian and Australian companies are finding opportunity as they push forward with business plans in times of low prices and challenging politics.
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.
Our bullish outlook for the energy and financial sectors support higher buy targets for three of our Wealth Builders. We also swap our lone consumer-discretionary position for a name that offers a better risk-reward proposition.
The break-neck volatility of the past few years and the likelihood of shorter cycles in the energy sector argue for diversification into secular growth stories that depend less on commodity prices and timing your entry and exit points.
On only five occasions over this period has the S&P 500 given up more than 2 percent of its value in the final month and a half of the year. We’re not inclined to fight that seasonal record. Looking ahead to 2018, 65 weeks have passed since the S&P 500 last endured a correction of 2 percent or more. We’d be surprised if stocks don’t break this historic winning streak at some point in the first quarter of 2018.
Although our outlook for oil prices and the US energy patch favors an overweight position in core midstream holdings, nimble investors can generate alpha in upstream names by buying when oil prices retreat to the low end of their range and taking some profits off the table when they recover.
Third-quarter earnings season is in full swing. One of our favorite utility stocks earns a higher buy target, while our two master limited partnerships (MLP) continue to generate excess cash flow, enabling them to reduce their reliance on the equity market for fresh capital.
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