Energy Midstream Investing -- AMZA and ETP???

[Lone Warrior]

Guys,

I am trying to to build a income portfolio with both taxable and Roth accounts. My focus currently is energy due to depressed pricing and a potential for high return when commodities recover. My take is that we'll always need energy whether it oil or natural gas. I pick midstream as it provide transportation, storage, and processing of energy so its earning is better insulated against commodity price volatility. AMZA is an midstream ETF and had been beaten down pretty bad due to drop in oil price but the fund still manage to keep its dividend payout of $0.52, which is about 20% yield at current price. I also hold ETP due to my belief that its projects will be cash cow.

What's your take on energy investment and what do you think of midstream in general and AMZA and ETP in particular?

Thanks.

P.S. No environmental high standing or anti-Trump debate please. I just need educated and experienced opinions and facts instead of personal hoohumps.

[james.hendrickson]

I am assuming you want income. Have you considered broadening your approach to include other sectors?

Here is a listing of stocks that pay you monthly (my favorite). You could have a look at it and see if maybe there are some companies there that you might have overlooked.

https://www.dividenddetective.com/big_dividend_list.htm

Two questions for you:

1) Who you bringing on board to help you with this? Is their judgement sound?

2) What materials are you reading about the industry? Is it good quality information?

[Lone Warrior]

James,

I am not relying anyone to invest for me. I use brokerage firms and do the buying/selling myself. Of course, I am paying a management fee of 1.36% with my AMZA fund but all funds have management fee. For individual stocks, I don't pay anything outside the cost for transaction, which is less than $100 a year at $7 per transaction.

I read up on AMZA and ETP very carefully before buying. I did and still constantly do review the performance history, look trend and progression, direct and associated risks, and try to understand the uptrend margin as much as I can. I picked these both at a good discount but a recent pull back as well as the reinvestment option that took place during the high price currently place me at about 5-10%. However, both are poised to come back strongly as commodity prices improves and projects achieve completion.

Currently, I stick with midstream energy sector as I understand it more than others. Due to my job, I am actually forbid to invest in defense sector which would be the best bet. I had looked into REIT, banking, and health sectors but haven't understand them enough to place my bets.

At my entry prices, I am looking at 19% and 9.3% yield for AMZA and ETP, respectively. I am very confident that ETP will be $25 or above by year end unless some major setback occur. It's second largest midstream MLP by asset but its adjusted EBITDA is the highest in the U.S. AMZA holds a basket midstream MLPs so it is less risky on paper and the sector had been high depressed but just recently start showing improvement. AMZA is still under my due diligence so I keep it in Roth to avoid having to deal with tax if I need to sell and reallocate the money somewhere else.

[snafu]

Fracking has brought old, closed sites back into production and there is now an over abundance of product. Other countries have promised/signed agreement to reduce production but actually increased production and they have far lower bbl costs. The economic ramifications of low price $ 43. from high of $ 100. have resulted in riots in oil rich Venezuela.

Some states/provinces offer huge rebates to those buying electric cars to ramp up sales. Gas prices in USA have dropped dramatically. I'm trying to figure out why flights are getting more expensive... maybe, just because they can?

Will huge population China who have an enormous desire to own a car of their own jump to electric cars? Will they move to LPG fuel? Do you know only a tiny segment of their population had a land phone as there was limited infrastructure. Suddenly there were mobile phones and even the poorest farmer, still tiling with an ox, could be seen out in their rice paddy talking on a cell phone. [both phone and prepaid minutes are very inexpensive]

[bjl584]

I guess it depends what happens to MLPs. If they recover, then AMZA might be a good play. If they keep getting hammered, then the dividend is going to be cut, and it may have been better to invest elsewhere. At least you're getting a 1099 on your investment and won't have to deal with a K-1. Not that that should be a determining factor in buying a fund.