Mar 16, 2017|
Philip Van Doorn (MarketWatch, Investment Options) by The Financial Exchange
Transcript - Not for consumer use. Robot overlords only. Will not be accurate.
Our stock talk segment right now and Phillip van Dorn of MarketWatch joins us if Philip were looking for some way to make a little bit of income. And you've identified some some ways one is master limited partnerships ML peace. Yes good morning born in we just put up an article. Discussing for different clothes and mutual funds which only invest in domestic energy partnership's. Specifically. Date focus on. Companies that are handling the transportation storage. And processing. Of oil. And natural gas and also refined oil products so they're not. They're shying away from the oil exploration business. Because that's even more risky in the pipe what does that. And also president Donald Trump has been pushing the pipeline business. I would think that increased energy output. Would be a positive for the sector. It sure is because that's what it's that's what it's all picked on me this is why the energy partnership's. So their prices dropping much faster than the price of oil drop. When that began late in the summer of 2014. So. These investors are always looking ahead because. The money that is made by the limited partnership depends on the volume. A material passing through the pipeline incident storage facilities they have long term contracts. Those are not based on the prices of the commodities they're transporting. But the volume has to either so what US production was cut. Their volume was cut their earnings went down so you had huge drops in the stock Dietrich. They've recovered quite a bit but it seems they have much more room to run with all that being said these are income vehicles if if you needing com you can consider these that you have to be able to ride out fluctuations. Is guarantee. That you will experience large. Price fluctuations. Over the long but in return for that you're getting a pretty large payout I wanna preface this thing I do own a MLP. Myself. Because I'm not an expert at picking you know one from the other. But they MLP pays a little over 7% right now as diversified is that one example of a way to play this. You know they'll be my guess. I very much believe in these examples the we have four closed two MOP funds featured in. This article they all have fields of upward of 8% but yet the diversity is there and also with these funds you have an advantage which is. A simpler tax situation. Then you'll have if you owned the limited partnership units directly. Yeah I think if you only I think it's it's a pretty small amount like 151000 dollars. There's a there's a bond if you don't like more than that you have to file these very complicated K one tax forms. Which the pain. The good news is something like eight MLP ascension he pays the tax for you before it's distributed so. You know you look at a big fat fee but it's that at includes the tax liability in my in my right amount. It could be a little bit more complicated by the then that but essentially yes support what you're getting with. With a closed and an OP fund is technically. The distribution of capital right so you're getting that beautifully guilt. Which you do not pay any taxes until you sell. You're shares and that could be many years down the line. Great point. What do should've bought a elections income one is a meeting at MLPs are an obvious one and the thing is. You know they've been under a cloud here's you don't take the risk of maybe massively overpaying. As you want with a lot of other proxies for the bond market like for example dividend paying stocks. That's some pretty well played out but like re Sanaa it would be a controversial area we get a pretty good deal to write. Yes and some people will say don't buy every now because interest rates are rising. That again don't by reaching out looking for income and if you're not very patient summary the ones that are. Why commercial properties. Holding them improving them possibly selling them for profits or even better racing their rents. You go up in value over time even when interest rates are rising. So no your read well researcher she if you like their business strategy than considerate. And again assuming you could commit for many years another overlooked sector is business development companies. These are drug companies that make. Corporate loans commercial ones. And they're they've. Grown in areas that large commercial banks have been shying away from because of the newer. Leveraged lending rules contained in the Dodd-Frank bank reform legislation of 2010. So these these can be riskier. Income plays. Like you get very high yield returns giving upping its up and talk over which are investment advisor or broker. Yet you in the article made reference to closed end funds to him. Again. When you're looking at an individual sector particular investment. Is there opportunity when you see stuff selling it like a big discount to its net asset value that's the one thing I think it's attractive to closed end funds some touching actually get a deal on the S that your buying right. Yes and you can get those two figures very easily and see if there's they're trading at a discount but but they can trade at discount to the value of their assets. For very long period of time true another another candidate like about the closed end funds is that on managers are not looking to sell more shares. They don't have new money coming in all the time which means they are not forced. To win best new money when they don't want to leave you you have say you might have a better active management style with close them. But I would say if there's if there's a moral of the story here is that there are definitely 5% plus yields out there. But you gonna have to deal with near term fluctuation right amid the days of get as Barry said again that 5% 6% CD. Guarantee you know with your payment principle on a certain date. And it's almost like old news right now. Pitched it's still lists and and he is likely to be so for years to come so. There has been the right mind frame income is the key you know the assets were plucked fluctuate in value. Don't look at their market values effort and if you look at the if you look at the energy partnership's. You can see that they've had this up and down consolation over and over again for years and years. And they always come back. It's important went up the investments you mentioned actually include ownership of assets underneath that over time will increase to some extent with the inflation so inflation protection is actually pretty good thing. Are all right. Wolf thank you very much fill them are born from market watch some fantastic ideas on. Alternative ways to get income in an income starved world I appreciate that against Phillip van Dorn for MarketWatch. In our stocks that.