David Galland at Casey Research sent out an email last night that has lots of Gumshoe readers guessing — it’s a bit of an odd “stream of consciousness” walk around the offices at Casey Research to check on the “abundance of opportunities” his team sees across all of the sectors they follow with their various newsletters.
Those sectors, by the way, are mostly the same sectors as everyone else — they have a energy letter, a tech letter, a gold letter, and some “big picture” letters that cover the economy and lots of different sectors.
So what’s the deal? Well, they’re trying to sell the “big deal” package that most publishers offer in one way or another. Most publishers have been trying to offer similar deals up as a big up-front one-time fee with annual small “maintenance” payments to keep lifetime access to everything they publish forever, but Casey is calling theirs OnePass and it basically is a discounted annual package — you buy a subscription to all of their newsletters for about $1,750 a year, with the same payment in subsequent years as you renew.
Whether or not that sounds like a good deal is up to you, of course — we don’t subscribe to any of these newsletters we cover, since it just wouldn’t be sporting — but we can, at least, read through this email ad with you and tell you what Galland’s hinting at as the “best picks from all our analysts.”
They do give you a freebie up front, by the way, so we’ll start with that:
Alex Daley of Big Tech, their new large-cap technology letter, said his current favorite is …
“a leader in the automated navigation of construction and farm equipment, an $8 billion company with a $25 billion trajectory on global growth.”
And Galland “gave that away” as a “bonus” for reading the ad, that’s Trimble Navigation (TRMB). I’ve never looked at this one all that closely, and they’re up pretty close to their highs but are expected by analysts to keep growign revenues by at least 10-12% per year and earnings by better than 20%, so that makes it a bit easier to stomach the trailing PE of about 38.
We’ve got more to cover quick, though, so we’ll let you research each individual one on your own. Next?
“The Energy Team, headed up by Marin Katusa, is convinced it has uncovered the ‘Next Bakken’ – a massive new energy play with every bit as much potential as the original. Best of all, they are now locked onto a small-cap company that has built a stunning 2-million-acre concession on this potentially game-changing new play. (We recently heard from participants at a major energy conference that, during a Q&A session, a major oil company executive acknowledged they are paying close attention to the small company. A takeover in the works?)”
That’s one we’ve covered before (then been snookered on with a red herring, then covered again), PRD Energy (PRD in Toronto, PREGF on the pink sheets). Since Katusa started pitching it as the lead play on the “next Bakken” (in Germany), the shares have just about doubled — they were staking a big bet on the fact that early results were expected from their first well in mid-September, but that drilling hit technical difficulties so they’re now expecting results in mid-October, which has really passed with no word from PRD.
The first well is not the only thing happening with this company, I’d describe it as more of an important “proof of concept” that will help them get more partners and funding and government enthusiasm for expanding their exploration program. The longer-term promise of PRD Energy might rely on fracking and large scale stimulation, but they’re shying away from even using the word fracking now because it would undoubtedly cause a huge fight — they are hoping to use stimulation, modern techniques, and horizontal drilling without hydrofracturing to revive a bunch of old, proven, but abandoned wells and fields in Germany that were conventionally “played out” decades ago.
That’s my assessment, not exactly what the Casey folks or the PRD folks are saying, and they undoubtedly know a lot more about this one than I do. But since the Casey folks have played up these first results as huge for PRD, I expect the stock will probably fall dramatically if those results are disappointing or there are more technical drilling issues that delay results again. That’s just my guess.
“The Casey Report, our flagship publication headed up by Dan Steinhart with co-editors Doug Casey, Bud Conrad, and Terry Coxon, focuses on identifying the most powerful trends driving the global economy and the investments best suited to the current environment. Deep-value stocks, precious metals, energy, agriculture, and income are all represented in the Casey Report portfolio.
“In response to my request to Dan for his current favorite, he came right back with a master limited partnership (MLP) that owns two refineries in the middle of the country, giving them easy access to cheap shale oil in Oklahoma and Kansas. Dan elaborated, “Most US refineries are on a coast, which was a strategic advantage just a couple years ago when the US imported so much oil by boat. Now the place to be is the heartland, near the newly unlocked oil.”
“Remarkably, this MLP currently yields around 19%. Why so high? According to Dan, ‘The market doesn’t believe in it yet. It only went public this year. We’re closely monitoring the situation. That’s because as the company proves itself, we would expect the yield to be bid down to around 12% – meaning there’s nice capital appreciation potential and a juicy yield.'”
This one, sez the Thinkolator, is CVR Refining (CVRR), a Carl Icahn-controlled company (he controls CVR Energy, CVI, which spun out but still controls this refinery MLP and the CVR Partners fertilizer MLP, ticker UAN). Their primary asset is indeed two refineries in Oklahoma and Kansas, and they pay out a huge current yield that’s now about 20%. Refineries have been seeing their margins squeezed this year after some spectacular years, so investors are indeed a bit fearful that these huge yields will continue. I haven’t looked at this one closely of late, but it was also Bryan Perry’s top pick for his Cash Machine newsletter back in June and we did go into a bit more detail then (the share are down about 15-20% since then, though they did recover from a recent sharp drop).
CVRR was spun off publicly just in January, so it’s still early days and, well, if you see a 20% distribution yield you pretty much know that the market doesn’t think it’s sustainable — the question is really whether you agree with the market or not, and to make a smart decision along those lines you’d need to know a lot more than I do about the refining business, their specific assets, and the prospects for oil and refined products prices. If you’ve been doing that thinking yourself, feel free to share it with a comment below.
If you’re curious about that Icahn connection and the structure of these companies, by the way, a Motley Fool writer did a pretty good job of explaining it here.
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These are pretty interesting, actually — if the Thinkolator’s right on this one (and it usually is), then they’re teasing the new fixed-maturity ETFs that hold corporate bonds maturing in a given year and liquidate at the end of that year and return the net asset value to shareholders.
This gets rid of one risk of most bond funds, that they never really mature because they have to constantly buy new bonds to replace the maturing ones (even if they’re not trading more aggressively than that), so you always have a hard-to-define risk in your portfolio when it comes to possibly rising interest rates. If your bond fund is just holding a basket of corporate bonds that mature in a given year, and they just hold the cash they get from those maturities until the end of the given year and return it to you, you are