An incredible opportunity in oil and gas... Double-digit upside in a blue-chip dividend-payer?... A 'heads up' from Doc Eifrig...
Regular Digest readers know we've been covering the crash in oil prices...
In short, surging shale oil production here in the U.S. – combined with higher than usual production in Saudi Arabia and other members of the Organization of the Petroleum Exporting Countries ("OPEC") – have caused a huge "glut" of oil around the world. And prices have plunged.
The price of West Texas Intermediate crude oil (the U.S. benchmark) has fallen from more than $100 per barrel last summer to less than $50 per barrel today. This has crushed the shares of oil producers and many other stocks in the sector.
But the news isn't all bad...
As we've mentioned, lower prices have benefited some energy companies, like refiners and oil shippers. And they could be creating a surprising opportunity in one "blue-chip" oil producer.
Last month, we mentioned oil giant Chevron had gone "on sale." As we wrote in the June 16 Digest...
Today, the oil giant is even cheaper than Wal-Mart, trading at an EV/EBITDA ratio of 6.6. (Porter's team says that as a rule of thumb, an EV/EBITDA ratio lower than 10 is considered cheap.) Its price-to-earnings ratio sits at 11 – a staggering 43% discount to the S&P 500.
Not only was the stock cheap, but its dividend yield had risen above the important 4% level...
As we noted, Chevron has increased its dividend every year for the past 27 years, making it a member of the elite "Dividend Aristocrats." This 4%-4.5% dividend level has acted as long-term "support" for the share price over the past 20-plus years. In other words, whenever its dividend has moved above this level, shares have rebounded not long after.
Since then, shares have fallen further, along with the price of oil, and the company is even cheaper today.
The stock now yields a huge 4.7% dividend, and new research from our colleagues Steve Sjuggerud, Brett Eversole, and Rick Crawford of True Wealth Systems suggests that an incredible opportunity is now approaching.
As they wrote in last week's True Wealth Systems Market Extremes...
Today's extreme is in oil and gas giant Chevron (CVX). After falling 26% in the past year, this company is now extremely oversold... We can see this by looking at Chevron's weekly relative strength index (RSI).
The RSI takes a company's recent stock gains versus its recent losses and builds them into a 0-100 index. A low RSI shows an oversold opportunity... which often leads to a move higher in prices.
Chevron's latest weekly RSI is at an extremely low reading of 29. That means investors are selling at a record pace. And when that reverses, we could see big gains in Chevron.
According to their research, investors have only been this bearish on the company five times in the past 35 years. And history says a huge rebound is likely...
These five trades led to double-digit returns within a few months, on average. And a year later, the company bounced 27%, on average. That's a huge one-year return!
Now, Chevron is still in oversold territory. So we don't recommend buying it today. But we'll keep an eye on this stock as we monitor oil and gas prices going forward. Once an uptrend emerges, Chevron could offer double-digit returns within just a few months.
As they noted, they're not buying just yet. They're waiting for the RSI to reverse and for an uptrend to begin.
But once it does, investors could have the rare opportunity to buy a "Dividend Aristocrat" yielding close to 5% with the potential for quick double-digit gains.
Switching gears a bit, our colleague Dr. David "Doc" Eifrig asked us to pass along a "heads up" for readers thinking about retirement or just looking to diversify some assets outside the U.S...
Next month, Doc is hosting a trip to one of the world's next great "up-and-coming" retirement and travel destinations... and he's inviting a small group of interested subscribers to join him.
Rancho Santana is Agora founder Bill Bonner's beachfront development on the Pacific coast of Nicaragua. Longtime readers may remember Porter has been visiting and writing about "The Ranch" for more than a decade.
But you may not realize how much it has changed since then... particularly over the past couple years. What was once a gorgeous but relatively undeveloped beachfront hideaway is becoming a true world-class destination.
Its natural beauty and spectacular views – five beaches, plunging cliffs, and stunning sunsets – are still there, but they're now joined by modern amenities like high-speed Internet, 3G cellular service, award-winning restaurants, and a brand-new oceanfront inn... not to mention the beautiful golf course down the road, and the soon-to-be-completed Costa Esmeralda International Airport just 15 minutes away.
Despite the improvements, The Ranch is still relatively unknown today. The cost of living is remarkably affordable, and real estate prices are a fraction of what you'd pay for a similar location in the U.S. But folks are starting to catch on...
In the past couple years, Nicaragua has been mentioned on the front page of the Wall Street Journal, the New York Times, the Financial Times, and several other popular publications as the next travel "hot spot." And recently, folks have started to single out Rancho Santana in particular...
Earlier this year, Forbes predicted it was "about to become less of a well-kept secret." In April, Rancho Santana was profiled in Fortune magazine, followed by write-up in Travel and Leisure in May. Last month, Food and Wine magazine featured Rancho Santana as a Central American "getaway." And just this month, The Ranch's new hotel was given a rave review by American Airlines' American Way magazine.
In short, this up-and-coming location is about to "arrive"... and today's opportunity is unlikely to last.
If you've ever dreamed of owning property in paradise with a like-minded community (Porter, Bill Bonner, Doug Casey, Mark Ford, and several other Stansberry Research friends and colleagues are already property owners)... or if you're just interested in getting some money out of your home country and investing in an emerging market with serious appreciation potential... Doc urges you to join him and take a closer look at Rancho Santana.
Doc will be visiting from August 19-22. There's no formal agenda for the trip... You'll have the opportunity to tour existing homes and can take as much time as you'd like looking at properties. Of course, there will also be plenty of time to play golf, horseback ride on the beach, hike, get a massage, or just relax. You'll also be invited to join Doc at an exclusive cocktail party and dinner at the new Los Perros Clubhouse.
Please note, there are only a few spots available for this trip. If you're interested in joining Doc, please contact Marc Brown at marcb@ranchosantana.com ASAP.
New 52-week highs (as of 7/27/15): Chubb (CB), short position in Suncor Energy (SU), and short position in Viacom (VIAB).
In the mailbag, one subscriber writes in about protecting his savings, and another asks about foreign brokerages. Send your questions and comments to feedback@stansberryresearch.com.
"I have followed your advice & opened a Safe Deposit box at a Royal Bank of Canada branch in Windsor. Since I have a daughter in Toledo, it is not that difficult to drive 45 minutes north from Toledo to Windsor, though it takes a while to cross the border and to cross back, and I always have to meet with the Canadian customs people to explain what I have been doing. A couple years ago they seemed to think I was nuts (my wife still does), but the last trip over one of the agents said that other Americans are doing it as well.
"My dad was born in 1905 and I still remember stories from him about the 'bank holiday' and having a government employee accompany you when you visited your safe deposit box. So, I feel very comfortable with some Gold in Canada. If you would like a longer story about my 4 trips to Canada, just let me know." – Paid-up subscriber David F. Smith
"Hi, I am a UK resident (and True Wealth subscriber) and love the letters and updates. I am looking for an online broker but can I still use the ones you recommend even though I am in the UK? The one I currently use doesn't offer trailing stops! Thanks." – Paid-up subscriber Danny
Brill comment: Most online brokerages (Fidelity, Charles Schwab, TD Ameritrade, etc.) offer investment services to folks in the U.K. But it's important to note that we recommend tracking your own trailing stops rather than entering them with your broker. As we explained in the October 28 Digest...
When you enter a stop with your broker, he places it in the market. At that point, market makers who match buyers with sellers know exactly where you're willing to sell. If an order to buy comes in well below market, the market maker can temporarily drop the price, pick off your stop, and the price will then immediately rebound. The price will only fall to your stop because the market maker knows where you're planning to sell. If you don't put stops in the market, that can't happen.
As always, we recommend tracking your trailing stops with our corporate affiliate, TradeStops. You can learn more about the benefits TradeStops offers by reading the June 18 Digest.
Regards,
Justin Brill
Baltimore, Maryland
July 28, 2015
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