Alright..the first step has been taken. The journey has started. Now for the all-important follow-through.
Continuing with the thesis of building a strong foundation for a healthy long-term portfolio, I am keen to build an element of diversification in the portfolio. We started off with the aim to find a solid long term holding and interestingly ended up , given the extraordinary times we live in, with a solid healthcare company (PFE). Now let’s turn our attention to finding another strong player, but this time in the Energy space.
Energy stocks are notoriously cyclical – meaning they ebb and flow with the overall economic cycles. An interesting article in US News identifies 7 Energy Stocks that could be attractive in 2021:
- Chevron Corp. (CVX)
- Suncor Energy (SU)
- Magellan Midstream Partners (MMP)
- Enterprise Products Partners (EPD)
- BP (BP)
- Cheniere Energy (LNG)
- EOG Resources (EOG)
Narrowing the list to stocks with a P/E ratio under 20, it becomes a 2-horse race – EPD and MMP.
Lets look at the fundamentals now:
|Gross Profit Margin||19%||40%|
|Net Profit Margin||14%||34%|
MMP appears to be better or Profitability as well as Management Effectiveness BUT I am not comfortable with their Long Term Debt being 222% of their equity. So although EPD is less profitable, their Financial Strength is more appealing to me.
VERDICT: EPD by a whisker.
Action: Make the second investment of the portfolio. Buy EPD
|Ticker||# of Shares||Value at Purchase|
|PFE||27 @ $26.60||$988|
|EPD||30 @ $23.00||$690|