December 13, 2014 Leave a comment
In order to decide what we should sell or keep, we need to review the stocks that have been hit across the six portfolios. There are 12 stocks listed and grouped across the various industries and regions.
We will look by group to determine what we recommend to do next based on the specific circumstances of that stock and the factors that caused their valuation to change. If it is a dividend related stock, we will also start to think if their dividend is “at risk”, because that would likely trigger another price drop.
- Exxon Mobil (XOM)
- Devon (DVN)
- Anadarko (APC)
Of the 3 US energy companies, Exxon Mobil is a long term keeper because it is so well and ruthlessly run. They have a reasonable dividend of about 3% that doesn’t seem to be at risk. XOM may even be a candidate for further purchases if it keeps declining in the short term.
Devon is much smaller than XOM. Their dividend is not as good, under 2%, but that also means that they aren’t being forced to support an unmanageable dividend burden. They are now at a 52 week low. From what I’ve read they seem to have hedged against falling oil prices which should insulate them a bit in the short term. Devon also could be an acquisition candidate at some point although their market cap is over $20B so only a giant like XOM could take them out.
Anadarko (APC) is also at a 52 week low. Their dividend at 1.4% is low and doesn’t seem to be at risk. The company also has financial flexibility. We are on the edge with APC if the oil rout is extended this may not be a stock to hold. On the other hand, in any sort of “bounce” in prices, would expect the stock price to rebound as well.
Global Energy (ADR)
- Royal Dutch Shell (RDS.B)
- Sasol (SSL)
- Statoil (STO)
These global energy companies not only are hit by the drop in crude (see above), but also the decline in foreign currencies vs. the rising US dollar.
Statoil (STO) is denominated in Norwegian Kroner. Over the last year the Kroner has declined 20% vs. the US dollar. This means that our ADR has fallen 20% additional beyond the impact of other (negative) factors on the STO stock. On the other hand, in the past the rising Kroner has boosted returns compared against US equivalent stocks, and provides diversification should the US dollar fall. Statoil is likely going to defer some major deep water projects since those are not economical at the current oil price. The dividend is now over 6% with the stock price decline; in general when dividends go much beyond 5% they often turn out to be unsustainable, or in any case should be watched closely.
Shell (RDS.B) are denominated in UK pounds, which has fallen 5% this year vs. the US dollar. Shell seems to be in relatively good shape, but the stock (like virtually all energy stocks) is at a 52 week low. Their dividend is at almost 6% which seems sustainable for now but may not be in the long term.
Sasol (SSL) is denominated in South African Rand, which has fallen 11% vs. the US dollar. SSL is a large energy company for Africa, but is much smaller than the other global majors. The dividend is near 6%, a level to watch closely. The stock has lost almost 50% of its value and may be a buy at this point or for consideration.
Canadian Energy (ADR)
- TransAlta (TAC)
Chinese Internet (ADR)
- Weibo (WB)
- Amazon (AMZN)
Chinese Shipping (ADR)
- Seaspan (SSW)
Casino / China
- Wynn (WYNN)
Mexico / Consumer Staples (ADR)
- Coca Cola FEMSA (KOF)