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Strategies & Market Trends : Value Investing

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To: Grommit who wrote (33013)	12/11/2008 7:56:33 PM
From: E_K_S	of 78918

Here is another idea on how to invest in oil so you can lock in your monthly gasoline costs for many years out into the future. I suggest buying a Canadian Oil Trust that spins off dividend distributions each month. For example, buy 400 shares of ENERPLUS RES FD (NYSE: ERF) for a total investment of $7,800 and you will receive $124.00 each month, plenty to fuel your cars. If you are lucky, after four years your initial investment should double in value to $15,600 or $39/share which is just above its 200 day MA of $36/share. ERF tracks USO so as oil increases then the price of your ERF shares should rise too. finance.yahoo.com You do have to pay tax on the dividends you receive and a foreign tax is also withheld by Canada (which you get back when you file the appropriate IRS form). You want to buy the shares when you believe oil is near its low. You can also increase your return by selling covered calls against the shares you own which allows you to peel off a few shares for a nice gain when the stock is called away. I set up a similar investment (1,390 shares of ERF) to cover my monthly health care premiums but the only problem was oil went down while my monthly health care premiums increased 16%. I double down when oil fell below $40/bbl and plan to sell covered calls on my excess shares once oil moves back over $60/bbl. Hopefully any gains I might make on the oil investment long term will cover the annual increase in my monthly health care premiums. In the meantime you continue to receive your monthly distribution even though the underlying commodity has changed in value. Be aware that if oil remains below $40/bbl for a significant amount of time (like more than 12 months), ERF will probably cut their distribution payout by 50%. Management trys to maintain a constant payout by hedging their production in the future. EKS

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