Royalty Stocks: What's Out There
StreetAuthority | May 31, 2012 07:30AM ET
They're arguably the most successful high-yield stocks to ever hit the market. I'd venture more fortunes have been made with these securities than just about any other income investment out there.
And thanks to the market's recent drop, I think they present a great opportunity for income investors right now. In fact, the last time I saw this sort of opportunity, I was up 80% on my investment in just six months. But before I get too far, I want to show you what some of these stocks can do over the long term.
Few investors have heard of BP Prudhoe Bay Trust (NYSE: CRT ) is down 22%. That's in spite of their high yields.
'Disconnect' Can Mean Money
I think this disconnect is a great opportunity. But there's more. In addition to oil, many royalty trusts produce a lot of natural gas -- which is up 26% since late April.
Meanwhile, these trusts continue to pump out distributions the size of which are found in few other places.
Let me be clear. There's no guarantee that you'll make money from this disconnect. But history is certainly on your side.
After the market dropped in October last year, I saw an opportunity and added shares of SandRidge Mississippian Trust to my "real-money" portfolio for my premium Top 10 Stocks advisory after panicked investors dumped the shares.
Within months, I was up over 80%.
Risks to Consider: Don't get me wrong. Royalty trusts aren't risk-free (nothing short of a savings account is). And as you've seen, they can be volatile as short-sighted investors sell in a panic.
Action to Take --> But when opportunities like this appear, they usually don't last long...so if you plan to take advantage, then I'd do it soon.
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