U.S. oil drilling-rig activity more than doubled over the last 11 months, and U.S. crude oil production is up 800,000 barrels per day to reach 9.235 million since its 2016 trough.
Greater supply and demand for U.S.-based energy naturally increases strain on existing U.S. energy infrastructure assets.
This is creating a unique investment opportunity. And the Goldman Sachs MLP and Energy Renaissance Fund (GER) is a great way to take advantage of it.
GER is a Master Limited Partnership (MLP), which allocates investor capital in return for units and income distributions. The business model generates cash flow from fees at various links in the value chain: From pipelines to storage facilities to processing plants. The fund disburses a good portion of that operating cash flow as quarterly dividends.
Seventy-five percent of the fund’s focus is on U.S. pipelines, followed by oil and gas and oil and gas services. These segments of the oil industry benefit from strong economic growth, rising U.S. consumption and
increased production.
Consider these added benefits of GER:
Sports a 12-month yield of 7.96% — 560 basis points above that of the U.S. 10-year note.
No annoying K-1 tax forms.
Minimal exposure to the outright price of oil and natural gas.
My recommendation: Using 3% of the funds you have allocated to the Income Investments section, buy Goldman Sachs MLP and Energy Renaissance Fund, symbol GER, at $8.25 or better, good-till-canceled. I will monitor the risk for you, via a mental stop I will hold.
In the meantime, …
Continue to work your order to buy Royal Gold, Inc. (RGLD) at $63.10 or better.
RGLD rallied away from our limit price last month, but don’t chase the market. This is where many investors mess up — they fear missing the move and then pay up to own the stock. That’s not wise. I’ll let you know if any adjustments need to be made.
Finally, maintain current positions in Westlake Chemical Partners LP (WLKP) and GAMCO Global Gold, Natural Resources & Income Trust (GGN).
