Hennessy Gas Utility Index Investor (GASFX) - Started building my MLP/Utility Basket
Organovo Holdings, Inc. (ONVO) - Doubled up starter position
Magnum Hunter Resources Corp. (MHR) - Peeled off 25% of current holdings w/ proceeds off to cash
Started a 1% portfolio position in the GASFX Fund. This is a low fee (.06% management fee) specialized sector fund that will act as my basket of NG Stocks (The fund invests at least 85% of its net assets in the common stock of companies that have natural gas distribution and transmission operations.). There is a redemption fee if withdrawals are done 90 days or sooner after the investment. So the strategy is to build this position say up to a maximum of a 10% portfolio position over the next year buying the fund after the close on market dips. Orders have to be placed BEFORE the market close to obtain that day's market closing price.
Then my plan is to build another 10% portfolio position in no more than 5 specific MLP's that operate in the NG gathering, processing and/or LNG transportation sector. That's a 2% portfolio position in each identified company. I will use the GASFX Basket to fund more Buy's in these MLP's as they fall in price and/or the MLP's offer secondary stock offerings.
I expect it may take at least six months to build my GASFX Fund "basket" doing average-in Buys on market sell off days.
Below are the Value & Growth Measures of the GASFX Fund compared to the Utility Average.
Their top 10 holdings are below:
The value premise is that as both the Fed and Japan are now in QE mode, the cost of capital will remain historically low allowing these utility "like" companies to grow their infrastructure which is focused on the gathering, processing and distribution of North American natural Gas. From time to time, there will be company specific "value" opportunities in this sector that I can fund from (1) cash reserves and/or (2) selling shares in the GASFX Fund.
I am also betting that this sector will outperform in both yield/distributions and growth. Multi year growth will come once the North American shale gas infrastructure is built and can supply the new capacity to both Europe and Japanese customers. The current LNG per mcf differential for US LNG to Europe is about 2x the current price and for Japan LNG is almost 4x the current market price ( $4.11/mcf US vs $8.40/mcf UK vs $16.00/ Japan mcf). The differential above actual processing and distribution costs is the potential profit for companies that distribute the LNG to these customers.
This is a long term buy and hold strategy that may take 5-8 years to play out. My MLP individual stock buys will generate portfolio income and capital gains will be maintained inside the portfolio. The GASFX Fund pays a small quarterly dividend and the annual capital gains are distributed every December. Therefore, these gains must be realized each year.
I also doubled up my starter position in ONVO my speculative Bio/Tech company. The value play here are two: (1) The time to invest in these companies is when interest rates are historically low so their cost of capital is not a significant factor in building the business and (2) another tranche of warrants have just been completed by the company. Warrants are exercised and converted to common shares and held or sold to raise capital for employees and/or the company. This selling is now over (at least for this round) and the stock has sold down so for me, this is a good entry point. The most recent sell off completed March 31, 2013 as 100K shares of common stock was issued by the company to pay off a promissory note used for consulting services. (Note: Pg-2- of the link 1st paragraph explains the 100K shares issued to pay off their promissory note) I believe most of these shares were sold this week thus allowing a good entry point.
Peeled off another chunk of MHR shares. I started to harvest the real money on this long term investment (held some shares over 3 years) as my current cost of shares sold now are below $3.00/share. My plan is to eventually close out this position and will use the remaining shares as a source of funds for (1) new or current E&P companies like PVA and/or SSN and/or (2) the NG gathering, distribution and LNG theme.
This plan allows a strategy to invest as the market corrects (at least make buys into the GASFX fund on the big down days). However, if there is no sustained correction because of the unique FED QE program, I can average into the GASFX fund and/or special situation stocks (like MLP secondaries) as values present themselves. The more I watch these huge sell offs and the end-of-day recoveries along w/ historically low 10yr (1.70%) and 30 yr (2.98%) treasury rates, I get the feeling that Mr. Market will continue much higher. This cheap capital will eventually make it's way into this NG sector creating jobs and creating our own "NG opec cartel".
EKS |
