Yesterday, I discussed my intentions to remain short on natural gas prices. However, there is one stock that has drawn my attention regardless of natural gas prices over the next six months. There is a real buying opportunity in this space.
Energy Transfer (NYSE:ET) is a master-limited partnership that transports natural gas and other fuels through pipelines. Simply put, they charge money to move fuels from Point A to Point B. The company just announced a secondary offering of about 86.9 million units that are owned by a subsidiary.
Now, shares fell on news of the announcement and drove the stock down 4.3%.
Shares hit $8.00 and pay an annual yield of 7.3%. In addition, the stock is ridiculously cheap at a price-to-earnings ratio of just 4.54x. Investors are panicking a bit about falling natural gas prices and the belief that the United States will cut back on natural gas due to government mandates.
The simple truth is that natural gas will remain the dominant form of fuel for electrical generation for the next few decades (and possibly permanently if the Green Dreams don’t come to fruition.)
If you’re looking for a long-term investment with an incredible dividend and gobs of cash flow, use this sale to your advantage. The company did not use any of the selling to generate revenue and it looks stable. In addition, the company just dramatically increased its assets and future cash flow with a great acquisition of Enable Midstream. I’m bullish for the years ahead.
The S&P 500 returned to positive conditions on Tuesday morning. Energy stocks and housing stocks led the way, and the next level appears to be the banking sector.
While tech stocks pushed much higher, there remains a lot of negative pressure in the space. The same goes for healthcare and biotech stocks. I’m still going to be cautious, but I’m entering positions one sector at a time.
While Omicron has been the center of attention, I remind everyone that conditions started going negative for the markets about a week before we learned about the variant. In addition, be wary that we will likely have new variants and one with a high level of contraction can spur additional downturns in the future.
Regardless, we saw quite a shakeout over the last couple of days. It’s a reminder that you need to stay in the market unless you are an active trader. The S&P 500 is back within an earshot of its recent 4,720 highs. Again, it appears safe to pile back into the mega and large-cap stocks. But stay cautious in the speculative small-cap and micro-cap space.