Resources, Energy, & Utilities 844

Energy shares have been the big winners in 2021, gaining 30.6%. And Resource stocks are holding their own.

Devon Energy Corporation (DVN)| Daily Alert July 14
Energy stocks have thus far retreated normally, so we still think the group in general (and Devon Energy in particular) will see higher prices ahead. Oil prices are still holding north of $70, while natural gas prices have actually surged (partly due to the crazy heat in many parts of the country).

While we don’t like to do too deep of a dive into numbers projections, the fact that the company paid a 34 cent per-share dividend based on Q1 cash flow (paid out yesterday) should translate into more than that for Q2, as prices have clearly been higher during the past three months. Of course, we’re never complacent, especially with energy stocks, which can turn tail in a hurry, but we continue to think DVN will see higher prices ahead.

If you don’t own any, we’re OK taking a swing at it here. BUY
Michael Cintolo, Cabot Growth Investor, cabotwealth.com, 978-745-5532, July 1, 2020

Fortuna Silver Mines Inc. (FSM) | Daily Alert July 19
Fortuna Silver closed its acquisition of Roxgold, creating a low-cost, diversified, growth-oriented intermediate gold and silver company. We are very bullish on this combination.

The stock price has dropped from almost $8 a share immediately before the merger announcement down to where it traded a year ago. This will not last long; Fortuna is a strong buy at the current price.
Adrian Day, Adrian Day’s Global Analyst, adriandayglobalanalyst.com, 410-224-8885, June 11, 2021

Pinnacle West Capital Corporation (PNW) | Daily Alert July 22
Pinnacle West Capital is a utility that provides electric service to more than 1.2 million customers via its Arizona Public Service unit. PNW’s owned power plants include the Palo Verde nuclear facility, several coal-fired and gas/oil-fired plants, as well as more than ten solar farms.

Management has deferred earnings guidance for 2021 until it receives a decision on its most recent rate case, which is expected this quarter. But we continue to think PNW ought to benefit from Arizona’s population growth that remains above the U.S. average, and from opportunities to invest in the growth of renewable energy.

We also note that a couple of the world’s largest semiconductor companies (TSMC and Intel) have both announced plans to build several Arizona factories in the next few years. Pinnacle has earned an average return on equity of 10% over the past decade and sports a rich dividend yield.
John Buckingham, The Prudent Speculator, theprudentspeculator.com, 877-817-4394, July 2, 2021

Essential Utilities, Inc. (WTRG) | Daily Alert August 10
Municipal buyouts benefit communities by turning over systems to financially stronger entities that can utilize scale benefits to cut costs, and improve service by quickly and methodically replacing failing infrastructure. They benefit by acquiring utilities by increasing their scale at a low cost, therefore providing reliable fuel for earnings and dividend growth. And the more companies grow, the more profitable and able to add scale they become.

My view, however, is it will also provide a big boost to takeover activity in states with “fair market legislation” where utilities are now focusing their efforts, for example Texas. And with investor owned utilities already making great strides replacing obsolete pipes and mains, they know exactly how to put any federal dollars to good use.

My favorite water stock remains Essential Utilities when it trades at 50 or less.
Roger Conrad, Conrad’s Utility Investor, ConradsUtilityInvestor.com, 888-960-2759, August 2021

*Pardee Resources Company (PDER)
If you want a deep legacy natural resource royalty/only asset play, Pardee Resources is it.  Pardee has deep metallurgical coal asset/reserves, probably 3-4 times the average coal company-proven reserve in the ground. 100,000 acres of almost all timberland that are well-located in the east and near good markets that need that product. There’s some developable real estate in these 100,000 acres and also some nice energy assets (mostly natural gas). I would guess 80% of the value here is coal and timber and I consider both timely here.

Contrary to popular belief by the public/media, conventional wisdom, etc., coal usage is still rising globally and net coal prices are strong. I expect the dividend to be raised next year on higher earnings ahead and below $200 this is a bargain.
Bob Howard, Positive Patterns, P.O. Box 310, Turners, MO 65765, 417-887-4486, July 20, 2021

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