Investing $, where is highest return?

[sahtt]

Is your background in finance and wealth management or more in the field of energy? Isn't your masters thesis in canadian sands oil recovery re engineering/economics?

Good memory RSO! All my work experience outside of a 3 year stint at National OilWell Varco is in finance as a securities trader, investment consultant to advisors, and currently in a role specializing in alternative investments. I run the firm's energy offerings which unsurprisingly are primarily oil & gas although I am slowly working to expand that. My current firm created this position for me after I finished my graduate degree as a way to bribe me to stay for another year or two (so far it is working) and still leverage my petroleum engineering studies. They are paying for all my CFA related activities which I finally have time to work on as well which is kind of them.

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I like you two involved in our stock related threads, like medicine, there is some art involved ..

For many reasons I hope there is less art involved in medicine than finance! A brief historical review of medicine outside of the last 75 years doesn't give me much confidence, however. Trading solely off bollinger bands (or fill in the blank) and blood letting have about the same credence IMO.

 

[docjohn]

blood letting is still used in very specific cases as are leeches....so get out your abacus..

 

[Lostbuckeye]

The rule is...the higher the return, the higher the risk and the more due diligence is required to minimize losing your ass. Here's a plan, take a small amount of the money that you plan to invest and book a flight and room in any casino hotel in "Loss" Vegas. Then go to the bar and drink until you can fall up the steps to a blackjack table. Then take all of your remaining cash and put it all down on the next hand dealt. You'll either be laughing or crying in the next five minutes.

Seriously, I sympathize with your dilemma. If you are young and can afford to sit on the funds for the long term, find a moderate risk mutual fund and let it ride for a while making minor tweaks to adjust for economic changed quarterly. There are plenty of funds out there that could fit your long-term needs. If you are looking for a quick return, you would be wise to invest only funds that you can comfortably lose. It's like gambling. There are some dark clouds on the global horizon that could affect our markets in the not too distant future. For example the real estate bubble in China could drag the rest of the world's economies down with it unless China has the will power to enact monetary reforms. If you are older (like me) and you will need the cash soon, I'd be a little more conservative. I'm not a financial planner (I'm a banker) I just play one on prime. So my advice is pretty much worthless.

 

[jond]

You could always buy a brick and mortar business.
I would assume(I don't know), that a gas station, papa johns, subway, etc return over 10%.

 

[white98sh]

No pissing match wanted on this side either my friend; we just appear to disagree about the value of looking in the rear view mirror when driving forward. A security's performance in the last 12 months has almost no bearing on my decision to purchase it today. The set of risks when the stock was trading significantly higher than it was now 1 year ago are different than now (not necessarily less or more, just different).

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My theory is a lengthy one and it doesn't end with a decisive statement/position though I wish I was able to arrive at one.

Major factors:
OPEC Production
Venezuela and Russia wild cards
North America production
Continued strength of the USD
Unknown performance of shale players in extended low oil price environment

...

In summation, Saudi Arabia likely doesn't know exactly what level will spark a response/policy change. They have the lowest costs globally given the information available to the public so if they see competitors crashing and burning they may decide to let oil fall lower than anyone thinks.

Thanks for such a detailed response. Way more than I was expecting! I'm sure you know Continental's founder recently sold all his hedges and only expects prices to go up from here. This is why I'm looking at oil companies and VNR is definitely on the radar now! I guess if the Saudis do decide to flood the market we'll be able to close out positions faster than they can make a big price swing.

Back to the OP's topic, yes individual stocks are great for returns (low oil helping boost world economies) but 10% in this environment is modest. My BIDU, TSLA, and FB have all doubled in the past ~12 months. BABA is looking very overvalued but it's still up 23% from IPO and this market could take it much further.

I expect some profit taking at year's end but January might be a good time to buy the dip. As always this advice is worth what you paid.

 

[Lostbuckeye]

You could always buy a brick and mortar business.I would assume(I don't know), that a gas station, papa johns, subway, etc return over 10%.

Those businesses also have a high failure rate. Though a franchise will help minimize failure. I'm not saying don't do it. I'm saying do your due diligence before you invest. I've approved financing on a lot of these type businesses over the years and for every success, I've also seen one go down in flames. Franchises are great opportunities for the right person willing to put in a ton of time, money and assets.

 

[willabeest]

make sure you look at future personal taxes when you invest. at least 50% of my investments are heavily influenced by what i think will be my tax situation in the future. (i live in California).

 

[white98sh]

No pissing match wanted on this side either my friend; we just appear to disagree about the value of looking in the rear view mirror when driving forward. A security's performance in the last 12 months has almost no bearing on my decision to purchase it today. The set of risks when the stock was trading significantly higher than it was now 1 year ago are different than now (not necessarily less or more, just different).

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My theory is a lengthy one and it doesn't end with a decisive statement/position though I wish I was able to arrive at one.

Major factors:
OPEC Production
Venezuela and Russia wild cards
North America production
Continued strength of the USD
Unknown performance of shale players in extended low oil price environment

Saudi Arabia is having less and less impact globally as North America's (Canada is an often overlooked important component here and Mexico may be as well in 2-3 years as they've recently opened their energy markets for foreign investment) production continues to expand. Russia and Venezuela are in total crises mode and severely underinvesting in their oil and gas operations. Short term there is simply no way to determine how these countries will respond to falling oil prices combined with falling domestic currencies - if history is any indication they will try to increase production under the table.

The strength of the USD has moved oil down as well. It's hard to gauge but I'd estimate 20-30% of the move down from 110/bbl is strictly due to the dollar. While this tends to revert "back" over time, it could take many years especially in the context of global monetary easing outside of America. Even though I recently expanded my energy holdings by about 250% on this latest pull back, I will be the first to admit I am not sure where these firms cost break even is. I have ranges that vary depending on things like i) the formation i.e. Bakken vs Eagle Ford ii) how quickly a firm can scale back cap ex (depends on firm size, lease agreements, and other factors) iii) the degree they can shift operations to their most productive assets. Their debt load can be a big factor as well. I got long OAS recently and am out of the money for the time being; they have great growth rates but lower quality assets and a higher debt load than some competitors. It's also down a whopping 55% vs say 20% for EOG. I think the risk adjusted returns on OAS are better if the market recovers but this firm would go out of business before EOG under the same conditions - it is higher risk.

In summation, Saudi Arabia likely doesn't know exactly what level will spark a response/policy change. They have the lowest costs globally given the information available to the public so if they see competitors crashing and burning they may decide to let oil fall lower than anyone thinks.

So in light of OPEC's unwillingness to cut production, how do you think that impacts VNR and other oil services? Is it a good time to buy?

 

[sahtt]

So in light of OPEC's unwillingness to cut production, how do you think that impacts VNR and other oil services? Is it a good time to buy?

Low oil hurts almost everyone in the sector; even natural gas firms like VNR produce some liquids (12% in their case). For those that produce significant liquids production, even if hedged out a couple years, the present value of their future cash flows come into serious question. I still don't own any VNR but my bid is not far away. Certain formations have cost structures that make drilling at these levels unprofitable. For the few firms that can concentrate on very high quality parts of formations and reduce cap ex elsewhere, they will be okay (i.e. EOG). These names have not joined the massacre taking place on names like OAS.

Several firms I follow are trading like they are going bankrupt; I traded through the financial crisis so I've seen this before. On a few the market will be correct but on most they will hang in there and recovery over the next few years. Trying to catch 'the bottom' is impossible but you can scale in cautiously and expect more downside pain along the way. I am personally loading up on high risk firms where I think the pain is more than priced in at this point. It may be long time before I am in the black, distributions may be cut substantially, and a couple of the firms may not pull through if oil stays this low for more than 12-18 months.

My recommendation is to check interest rate coverage ratios at the minimum. The reason OAS is being taking out to the wood shed is because it needs a decent portion of its revenues just to cover interest on long-term debt. If it survives you are looking at a 200-400% return if/when oil recovers to $90/bbl. It's going to zero if it can't curtail expenses in an astonishing manner and or oil recovers >$80/bbl in 12-18 months.

The main reason I buy into this carnage with little concern is because there is officially blood in the streets in the energy sector. Doesn't mean it's the bottom but it does mean the odds are on your side long-term. It's worth nothing CVX, XOM, etc. are not necessarily participating in the sell-off like smaller firms so they are not as good relative values if things turn around.

 

[RPM217]

I still don't own any VNR but my bid is not far away. Certain formations have cost structures that make drilling at these levels unprofitable.

So, I guess that your earlier post, where you said:
Secondly, I purchased VNR (for the first time) when it hit the low 20's recently and am in the money 2 points (~10%); not that where I purchased it has any bearing on my original post given the question

Is erroneous, you do, did or do not own/purchase VNR?
I'm a newbie to investing, and giving advice, I don't understand you saying that you bought it multiple times, and in a subsequent post, you claim to never having bought it.
Please enlighten this "newbie"!!!!

 

[RSO 34]

RPM your understanding is a little flawed based on how I read it. It makes no difference to me but I'll clarify for the sake of prime. First, a security's past return is not indicative of its future return. Anyone using past returns as the primary motivation for buying a security will pay a heavy price for it. In fact, one of the very few reliable statistical relationships over long periods of time in the financial markets associated with positive risk adjusted returns greater than the market is that securities that severely under-perform for 3-5 years tend to outperform their peers in the years after the fact. Secondly, I purchased VNR (for the first time) when it hit the low 20's recently and am in the money 2 points (~10%); not that where I purchased it has any bearing on my original post given the question is about purchasing securities today and not using a time machine to purchase them 52 weeks ago. Many of the top financial advisers in the nation (according to Barron's rankings, FWIW) call me for investment help; primarily on alternative investments in the oil & gas, hedge fund, and real estate space in that order. So this free advice may be worth a little money, but of course that is 100% up to the reader. My objective is to help the community, that is all (although part of that might have been ego driven )

Low oil hurts almost everyone in the sector; even natural gas firms like VNR produce some liquids (12% in their case). For those that produce significant liquids production, even if hedged out a couple years, the present value of their future cash flows come into serious question. I still don't own any VNR but my bid is not far away. Certain formations have cost structures that make drilling at these levels unprofitable. For the few firms that can concentrate on very high quality parts of formations and reduce cap ex elsewhere, they will be okay (i.e. EOG). These names have not joined the massacre taking place on names like OAS.

Several firms I follow are trading like they are going bankrupt; I traded through the financial crisis so I've seen this before. On a few the market will be correct but on most they will hang in there and recovery over the next few years. Trying to catch 'the bottom' is impossible but you can scale in cautiously and expect more downside pain along the way. I am personally loading up on high risk firms where I think the pain is more than priced in at this point. It may be long time before I am in the black, distributions may be cut substantially, and a couple of the firms may not pull through if oil stays this low for more than 12-18 months.

My recommendation is to check interest rate coverage ratios at the minimum. The reason OAS is being taking out to the wood shed is because it needs a decent portion of its revenues just to cover interest on long-term debt. If it survives you are looking at a 200-400% return if/when oil recovers to $90/bbl. It's going to zero if it can't curtail expenses in an astonishing manner and or oil recovers >$80/bbl in 12-18 months.

The main reason I buy into this carnage with little concern is because there is officially blood in the streets in the energy sector. Doesn't mean it's the bottom but it does mean the odds are on your side long-term. It's worth nothing CVX, XOM, etc. are not necessarily participating in the sell-off like smaller firms so they are not as good relative values if things turn around.

???

 

[sahtt]

I sold VNR shortly after I posted that and put it into oil heavy names that have sold off more sharply. Wasn't my plan but things moved much quicker than I expected. I'm looking to buy back in around $19 and hence haven't bought any yet in the sense I currently own none. I am long a solid 15+ energy positions half of which I've accumulated in the last 2-3 weeks. But thanks for the enthusiasm in my trading; I don't recall calling anyone a "newbie."

 

[RPM217]

I sold VNR maybe a week after I posted that and put it into oil heavy names that have sold off more sharply. I'm looking to buy back in around $19 and hence haven't bought any yet in the sense I currently own none. But thanks for the enthusiasm RSO..

Just a thought, if you're going to give investment advice to "forum friends", you might want to let them know when you're selling, and why, so as not to leave them hanging. At most firms that I'm aware of, there are certain rules regarding getting clients in and out of stocks that are owned by the advisor personally. Granted, I don't think that you're governed by the same rules here, but it would be an appropriate action, to let people know. Everyone here is an adult, and they should be making their own buy/sell decisions, based on their parameters for risk, etc. And like I said previously, the advice given here is worth what you pay for it.

 

[sahtt]

This is a forum where information is shared - no one is here should be trading solely off information you or I or anyone gives. I have placed 15-20 trades in my trading account alone in the past couple weeks and don't have the time or desire to relay the reasons why to the entire internet. Anyone is welcome to message/text me if they have my number for an update. My firm reviews my trades and I also have to be careful regarding communications with advisors since they are essentially my clients. That being said, no one is here is compensating me, that much is for sure!

 

[white98sh]

Thanks for your kind insight once again. I still haven't bought any oil stocks since I don't know where the bottom is. I agree today's action was bloodletting and no equity was spared, so there are some hidden gems. My theory is to buy after the bottom has been confirmed by charting and an upswing is in motion. Less profit but less risk also.

 

[RPM217]

I don't recall calling anyone a "newbie."

My reference to "newbie", is the length of time I've been guiding investors, and the length of time you've been guiding "advisors". I wouldn't dare to go up against an experienced trader, such as you, I'm a relative "newbie"

 

[sahtt]

My reference to "newbie", is the length of time I've been guiding investors, and the length of time you've been guiding "advisors". I wouldn't dare to go up against an experienced trader, such as you, I'm a relative "newbie"

Bit of a chip on your shoulder RPM? If you are going to be nothing more than condescending/sarcastic, message me personally if you need to act childish and we can carry on there and spare the rest of the forum. Pretty interesting given you are at least 20 years my senior. I disagreed with one of your premises and you seem incapable of dealing with it; that or I am grossly misinterpreting your posts although I doubt that is the case.

 

[RPM217]

Bit of a chip on your shoulder RPM? If you are going to be nothing more than condescending/sarcastic, message me personally if you need to act childish and we can carry on there and spare the rest of the forum. Pretty interesting given you are at least 20 years my senior. I disagreed with one of your premises and you seem incapable of dealing with it; that or I am grossly misinterpreting your posts although I doubt that is the case.

A little bit of a chip seems to reside on your shoulder, along with a large dose of attitude. At my old and senile state, I'm happy to learn things each and every day. You, my young friend, still have much to learn

 

[blue_myriddn]

Bringing this back on to topic - what are thoughts on more active investing as a means of stronger return using Dough.com? Seems intriguing to me.

 

[jond]

Bringing this back on to topic - what are thoughts on more active investing as a means of stronger return using Dough.com? Seems intriguing to me.

https://www.brainyquote.com/quotes/quotes/w/warrenbuff149683.html

 

[sahtt]

Glad you finally have that out of your system. I don't see any PMs so I'm going to be optimistic and assume that means you'll retire the passive aggressiveness.

The remainder of the year should be interesting. I was in Houston this weekend taking a CFA exam and you'd never know crude is on the 60's; that town is absolutely booming.

 

[white98sh]

I'm in VNR small as of today's big drop. Let's see if this is near the bottom.

 

[sahtt]

I'm in VNR small as of today's big drop. Let's see if this is near the bottom.

I bought tranches of BBEPP and VNRAP yesterday during the onslaught. If oil prices stabilize here I think we've (finally) seen capitulation in most names at this point. More pain to come if prices continue to slide. Both BBEP and VNR are 66-76% nat gas by volume but closer to 50/50 on revenue which is what counts. My portfolio is within a few percent of hiting its energy allocation limit. Many small and mid size players are participating in a conference hosted by Wells Fargo today; if history is any guide they'll post new figures on their hedging programs. The sell off in crude will make raising rates a more difficult proposition given inflation is going to be even lower now. Non-core will still slide. I will likely be completely out of my muni bond trade this week after the little boost they've received as of late.

 

[jond]

^^^ As far as oil, my question is how low will it go?
Is $65 enough to where Texas isn't making a profit? Or will it go lower?
I'm thinking now might be a good time to buy stocks like Exxon.

"UT energy experts: A cold war brews between Saudi Arabia and Texas"
"The fracking boom has pushed Saudi Arabia, the world’s cheapest major producer of hydrocarbons, to a very difficult choice. Either lose market share to upstart Texans, whose shale production is on the rise, or carpet-bomb the markets with cheap oil..."

http://www.dallasnews.com/opinion/l...-war-brews-between-saudi-arabia-and-texas.ece

 

[docjohn]

rig has a decent yield and is going on sale...