Adding ESP - Brompton Oil Split, 24% Dividend

Tesla, ARKK, and other stunning stupidity (or worse)

To Oil And Dividends, One And Done idea #8, I’m adding a stock that’s paying a staggering yield of 24%.

Scroll past this section unless you:

1. are long-term bullish on the price of oil, and

2. accept that a market plunge will badly affect most if not all stocks, even if commodities don’t fare as badly, so ideally you’re hedged, and

3. research this idea yourself, as always, and consider whether the preferred shares are more suitable for your goals vs. the Class A shares I’m suggesting

I’ve invested in Brompton Group’s product Energy Split Corp. - https://www.bromptongroup.com/product/brompton-energy-split-corp/ - which trades in Canada under ticker ESP - several times in the past 20 years, and done extremely well with it.

Note that most charts for ESP only go back about 8 years, as it had a different ticker originally.

Quoting from the link above:

Why Invest?

• Actively managed portfolio consisting primarily of dividend-paying  global energy issuers with a market capitalization of at least $2 billion

• Opportunity to invest in energy subsectors and related industries such as oil & gas exploration and production, equipment, services, pipelines, transportation, infrastructure, utilities, among others

• Enhanced capital appreciation potential for Class A shares due to leveraged exposure to the portfolio

My last round trip in ESP, I promised when it tanked again I’d go heavier into it.

Oil then briefly went negative during the COVID-induced lunacy of 2020 - April fools writ large - and ESP collapsed to a split-adjusted low of $0.39

I accumulated it between $1 and $2 in 2021. A year later it was over $8.00, and at some point along the way I sold out and promised myself again that when it tanked next time I’d go even more heavily into it.

By late 2023 it dropped briefly below $2.50 and today closed at $5.05

The moral of this story is that it’s highly volatile, as is the price of oil itself. That can of course work for or against us.

Cycles inevitably occur, and while experts insist you can’t time the market I keep trying while enjoying stupendous returns via highly consistent pure luck in the process. Particularly in the oil sector, as demonstrated before in this substack.

Oil And Dividends, One And Done idea #8, was most recently updated here:

I’ve been buying ESP the past year, and today it sits just outside my top-10 individual holdings at an average cost around $3.50 for my latest holding.

The past is past, so for purposes of keeping score in this substack I suggest it’s worth entering at today’s price because of a very bullish technical trigger plus it has re-started paying its $1.20 per year dividend, via $0.10 monthly distributions when the unit NAV (net asset value) of the Class A shares plus Preferred shares is $15 or above.

Its NAV is updated daily via the info link above.

Please reconsider the caveats listed at top of this post, and be aware that at even slightly lower prices its unit NAV will be below $15 thus will pay no dividend at all.

As for me, I’m adding until my average cost is around $4.00 and ESP sits firmly within my top-10 single-name positions, planning to hold until something causes me to lose faith in Brompton’s management of the fund or it again skyrockets in value to a degree that the yield is dwarfed by the risk of holding into another inevitable cyclical bust.

If, or when, it does collapse in value, all else equal I’ll only be looking to add when the next bullish timing signal occurs.

Reiterating part of my thinking from a prior post: oil is not momentum trash that can and someday will go to zero. Rather it’s among the world’s most necessary and vital commodities, and that necessity puts a safety net beneath responsible speculation.

There’s been a bunch more bullish news for uranium recently:

"A Lot Of Shuttered Nuclear Power Plants Could Be Turned Back On", Fed Energy Official Says

Nuclear power is the largest single source of carbon-free electricity.

The federal government is expected to continue restarting shuttered nuclear power plants in coming years to meet the increasing demand for clean, dependable energy essential for powering the economy of tommorrow. 

"There are a couple of nuclear power plants that we probably should, and can, turn back on," Jigar Shah, director of the US Energy Department's Loan Programs Office, told Bloomberg in an interview.

In March, Shah's office approved a loan to Holtec International Corp. to reopen the Palisades nuclear plant in Michigan. This was a historical shift and it was the first nuclear power plant to be reopened in the US, setting a precedent for atomic energy to make a triumphal comeback. The plant could begin producing power as early as the second half of 2025.

Shah said, "A lot of the other players that have a nuclear power plant that has recently shut down and could be turned back on are gaining that confidence to try." He declined to give specifics about which plants were slated to reopen. 

Goldman Offers "Burst Of Bullish Coverage" On Soaring Uranium Stocks

The sector has experienced a significant boost, with spot prices surging 40% over the past year due to production challenges faced by Kazatomprom, the world's largest miner, and potential U.S. restrictions on Russian supplies.

The price soaring has come on the back of a "burst of bullish coverage from banks including Goldman Sachs", Bloomberg writes. 

Senate Passes Ban Of Russian Uranium Imports, Risking Market "Havoc" And Soaring Prices

Uranium is One And Done idea #6, most recently updated here, where I stated that key uranium producers are falling short of targets while politics plays an increasing role in constraining the supply chain:

Motorhead’s substack is worth reading if you want a balanced view on Tesla and its very … ambitious, shall we say, reporting:

Tesla Q1 Results: A Shady Set of Numbers

Washington State Announces $45 Million Subsidy For Low Income Families To Buy EVs

Just when you thought you've already witnessed a lifetime's worth of examples of the government being excellent capital allocators with your tax money, one more shining example comes along…

Tesla Sucked Up Federal Funding for Supercharger Network Before Firing Whole Department

In Tesla Autopilot probe, US prosecutors focus on securities, wire fraud

U.S. prosecutors are examining whether Tesla committed securities or wire fraud by misleading investors and consumers about its electric vehicles’ self-driving capabilities, three people familiar with the matter told Reuters.

What took so long to “examine” this? Purely politics, as usual.

Note this video is over a year old, while these claims have since continued unabated:

I stated in February 2023, and reiterate emphatically today:

If Tesla bearishness somehow surprises you, start here for enlightening entertainment:

Common Sense Skeptic YouTube channel

Thunderf00t vs. Tesla

No one worth taking seriously suggests there are legit upside catalysts or value in Tesla anywhere near today’s price, and I expect it’ll be 80% lower in due time.

Note that while markets overall, and specifically tech fantasies like Tesla’s AI/robotics/“full self-driving”, have skyrocketed since then, Tesla’s share price is lower - a show of extreme relative weakness - while a tsunami of superior, less costly competition and a plethora of ongoing problems and revelations swamps it.

Absent any such troubles or charges Tesla would still be hyper-valued even at $25, so my long-term target remains very conservatively “below $50” and in my estimation shorting Tesla is textbook value investing.

Bullish for natgas:

Norway’s Cash Flow From Offshore Fields Crashes Due to Low Natural Gas Prices

Natural gas is One And Done idea #10, most recently updated here:

Sadly we can’t dare to hope a peak in collective idiocy is near, but we will definitely not see headlines like these below anywhere near a socioeconomic cycle’s low.

However polling across the globe on a variety of related topics suggest we are soon upon a pendulum swing, for awhile, and history gives us every reason to believe that will coincide with a memorable recession.

Transgender Space Force Colonel Says Using Pronouns In Emails Will Help Win Wars

Male Soldiers In Spain Changing Genders To Receive Better Benefits And Higher Pay

Utah Students Stage Walkout To Protest 'Barking And Biting Furries' In The Classroom

10% of all SNAP funding goes to sugary drinks

Your Tax Dollars At Work: US To Buy Ukrainian-Made Weapons For Ukraine

Shell Sold Millions In Carbon Credits That It Never Earned

Meanwhile we have scams nested within scams nested within delusions and scams.

Pay your fair share!

A month ago, while updating One And Done idea #4 - Gold and idea #11 - Copper And Basic Materials, I posted an update on the incredible wealth destruction caused by the Clown Queen of Finance:

Subsequently the Wall Street Journal published an article about her latest struggles. Here’s an excerpt:

Cathie Wood's Popular ARK Funds Are Sinking Fast.

Her investors are jumping ship.

They rushed into her funds and won big during the pandemic, when the star fund manager became a social-media sensation by making bold bets on disruptive technology stocks such as Tesla, Zoom Video Communications and Roku. They largely stuck with her when the funds' fortunes reversed after the Federal Reserve raised interest rates. Now, after years of bruising losses, many of them have had enough.

Investors have pulled a net $2.2 billion from the six actively managed exchange-traded funds at her ARK Investment Management this year, a withdrawal that dwarfs the outflows in all of 2023. Total assets in those funds have dropped 30% in less than four months to $11.1 billion – after peaking at $59 billion in early 2021, when ARK was the world's largest active ETF manager.

Hopes that the Fed will eventually pivot to cutting interest rates, along with excitement over generative artificial-intelligence technology, have pushed the S&P 500 up 5% in 2024. Those bets should benefit the ARK funds, too. Instead, shares of the flagship ARK Innovation fund have slumped 19%.

I found that article via Mike Shedlock’s recent excellent excoriation of Wood’s irresponsible and utterly asinine Tesla price predictions, which is well worth a read and a look at his tables and charts.

It shouldn’t be a surprise if ARKK is eventually shuttered at a small fraction of its current valuation. Along with Tesla, ARKK is a hallmark of the generational manic appetite for financial self-destruction via blind faith in totally obvious charlatans.

If pied pipers fail, many people are determined to implode of their own accord.

'A Ticking Time Bomb': Gambling Addiction Is at an All-Time High (and It's About to Get Worse)

Credit Card and Auto Loan Delinquencies Continue Rising; Notably Among Younger Borrowers

April Payrolls Debacle: Biggest Miss Since 2021 As Unemployment Rate Rises

Unfortunately the fascination for, fawning over, enabling, celebrating and enriching prolific spewers of obvious BS isn’t limited to the financial sphere, and the reckoning cannot and will not be avoided no matter which “war” is being fought or which virtually indistinguishable brand of war-profiteering puppets preside in power.

Arguably the best way to cope is to grow wealth and preserve it from persistent and ever-expanding misuse and outright theft, so take your market operations very seriously. That is the only vote you can cast that will truly count.