Dear followers and subscribers starting of the year Oil@Gas pipeline value based portfolio delivered positive result +21.51%.
To get calculation details please refer to following link: https://docs.google.com/spreadsheets/d/16OmTMNW-21n2HEhoj_RpFvvWNO1YDpPYn6OX5qrd-Eg/edit?usp=sharing
Trading strategy idea, backtest and comparison.
From entire of investments alternatives most of all I prefer midstream Oil and Gas infrastructure because it will never lose its meaning to be a crucial point in energy delivery to the consumer. This is the simplest business model, that associated with the most sophisticated ever exist engineering construction and safety measures. But stable cash flow and high level of certainty worth of it. Looks like it only one available investment opportunity that doesn’t have the usual live cycle, don’t need to struggle with competitors and to prove to a customer about product quality standards. It is a pure investment in tangible assets that have intrinsic value in biggest ever exist value chain and connect extraction of Oil and Gas with Refineries and Gas processing plants that trade yearly by hundreds of billions of dollars at energy commodities market
All of us heard about the IT revolution and its vanguard, for instance, Apple or Google. There are different ways can be used to measure the consequences of these revolutionary changes. It can be based on the total amount of stored database, or cell phones spreading for the last 20 years. It can be gauged by the number of hours that ordinary individuals spending on the internet or gaming. But what about shareholder’s wealth creation, what does this revolution brings and is it really so impressive? Is it only one possible way to generate so huge rate of return for the past 20 years or other industries also was revolutionized? Yes, it is and the fact shows that real Boom just passed in OilGas, and in its more specific area, such as Oil and Gas Pipeline. The IT revolution is Hype, that was widely announced in the media and millennials that use it in everyday lives the gadgets, internet, and social networks got it to the top of revolutionized marketing, logistics, communication, etc. All these events seriously modified retail business, communication services, and marketing till the ground and changes keep going to move forward.
Meantime OilGas industry, as I will demonstrate below is not so advertised but was and going to be the Ultimate beneficiary from Global shifting in OilGas worldwide landscape transformation. The key role here plays the US that for last 10 years was able to become the leader in Oil and Gas and now is biggest producers and going to empower this role by extension of oil and gas as exporter commodities. This deepest structural reformation in the global energy policy created biggest ever exist Capital inflow in relevant infrastructure that associated with storing and transportation, processing and it’s delivery to the final destination. Since 2000 the leaders of this industry showed impressive and overwhelming growth that able to compete with the IT sector and other breakout industries and companies that were in the trajectory of rapid growth.
Below I plotted chart that introduce Oil Gas pipeline owners that selected on yearly basis using following criteria:
Industry – Oil and Gas pipeline
PE < 25
Dividend yield > 4%
Selected companies ranked by capitalization and first 5 most capitalized companies admitted to portfolio as equal weight.
Revising data – first working date of each year
The result obtained from application of mentioned above investment rules based on value metrics has been plotted below. For comparison with IT sector I use 3 stocks AAPL – MSFT – AMZN and constructed portfolio that re-balancing annually as equally weighted.
Received data looks very impressive and demonstrates how simple value based rotation rules in Industry that experienced Oil shale boom can to give fantastic result that stay in a line with most profitable investments of last decade such as investments in IT sector.
Full data of trading results of value investing strategy available here
As you may note Oil and Gas pipeline value investing portfolio, constructed from companies that are owner of storing, transportation and processing facilities were able to demonstrate solid results. It is real triumph of infrastructure expansion that is material base of shale boom that moving forward including expansion to export deliveries oil and gas and increased role of US as super power in this respect.
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