Civeo Corporation (NYSE: CVEO) had its IPO back in June when oil was trading at $100 per barrel.
If you didn’t know already, Civeo is an oil services firm that provides housing for oil workers in the “man camps” in the Eagle Ford and Bakken, among others.
And for a while, Civeo was an interesting picks and shovels play on the shale boom…
But now with West Texas Intermediate crude trading around $50 per barrel, drillers and operating companies are cutting costs, and Civeo and the “man camps” look like they are the first to go.
The company has been one of the biggest stories heading into the new year. After trading above $25 after its IPO, Civeo has crashed below $4 per share as of this morning.
Shares fell on news that the company was slashing capital spending in 2015 and suspending its dividend. It’s never a good sign when a company has to scramble to keep its books balanced…
But the real silver bullet came when Jana Partners, the hedge fund led by Barry Rosenstein, sold its 11.5% stake in Civeo on December 30th.
New Year, New Strategy
I’m not telling you all of this because I have some secret vendetta against Civeo Corp. or because I think energy investing is bleak.
Instead, I want to illustrate how damaging short-term trading can be.
Think about it, Jana Partners held 12.24 million shares of Civeo, and it had to have bought them for around $25 when the company IPO’d. And now it’s sold them below $10, losing millions in the process.
These days in the energy market, such short-term bets on unproven companies like Civeo are a sure way to lose money… and a lot of it.
Don’t get me wrong, Jana Partners is an incredibly successful hedge fund (it’s worth about $11 billion at last count), but for investors like you and me, taking such risky bets on unproven companies can be catastrophic since we don’t have billions in extra money to cover our losses.
Instead, if you invest for the long-term — even if you consider yourself a day trader — you are going to see the highest rewards in the energy market.
Be aware that I’m not making wild conjectures or predicting you’ll be rich in five years. The seeds are being sown now to make long-term energy plays the most profitable…
With 2014 officially in the books, over the next month or so we will see the annual numbers that drive investment throughout the year.
Last Tuesday we got a sneak peek at some of the numbers that have us at Energy and Capital bullish on long-term energy plays.
Including some investments we’ve been keeping track of for a while now…
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ETFs, MLPs, and Long Term Growth
For the month of December, $3.13 billion was poured into ETFs tracking energy companies. That’s the most since December 2007, and is the most of any month throughout 2014.
Nasdaq (NASDAQ: NDAQ) just announced its plan to move deeper into the ETF game with its $225 million purchase of Dorsey Wright, a U.S.-based index provider and analytics company.
Dorsey Wright will add $5 billion in ETF assets to Nasdaq’s business, and sends us a signal that major investors are catching on to the bottom in energy stocks we’ve been talking about since Thanksgiving.
We’ve also seen this bottom in master limited partnerships, whose collective value has slid 70% since June.
That means that long-term investors should be building positions in the energy space, especially in high-yield exchange traded funds and master limited partnerships.
If you want to invest in this space — and you should, since it’s near a bottom — we suggest looking for MLPs and ETFs specializing in oil and gas services.
Although Civeo was an oil services company, its timing couldn’t have been worse. Larger, safer companies like Haliburton (NYSE: HAL) and Schlumberger (NYSE: SLB) reside in a few of the ETFs on the market that have exceeded expectations.
And one of the better, under-the-radar services companies in the U.S. is an MLP that’s trading well below its value.
The company’s business is required by law and can’t be cut out of capital budgets as easily as free housing for oil workers can be.
My colleague, Keith Kohl, has had his eye on this company for some time, and now you can have access to it, and the rest of his long-term energy portfolio.
It’s not quite ready yet, but check your inbox on Thursday, and get ready to start 2015 in the green.
Good Investing,
Alex Martinelli
With an eye squarely focused on the long-term, Alex Martinelli takes the art of income investing to a higher level within the energy sector. His research has helped hundreds of thousands of individual investors identify well established companies that have a long history of paying out dividends to their shareholders. For more info on Alex, check out his editor’s page.
