Monday, December 13, 2010

MVO Watch

MV Oil Trust (MVO)is a royalty income trust based on, as the name implies, petroleum products. I've opened a stock position in the trust for my own account.

ppspsarmacd obvh-a trend ma20ma50ma200
MVO $35.30

A royalty income trust doesn't operate production companies. Rather, it owns rights to the royalty cash-flows from production companies, and distributes those to shareholders as dividends.

MVO's underlying properties are mainly in Colorado and Kansas.

The Trust's share price has been in an aggressive uptrend since February 2009. It also pays a quarterly dividend, now running at an annual rate of 6.9%. It goes ex-dividend on Jan. 13.

At this point, anyone who read my essay over the weekend can be forgiven for fixing me with a stern, cynical glare and saying, "OK, Bovee. What happened to all this 'myth of the income play' nonsense?"

A fair question, and MVO is a good vehicle for illustrating how I intend to treat dividend-paying stocks going forward.

It is true that MVO has an attractive dividend. But it also has great financials -- an 81.6% return on equity and no debt to speak of. The institutional ownership is sort of slim -- 15% plus change -- but revenues are in the process of recovering sharply after downturns during the depths of the financial crisis.

Volume is less than I would like -- typically a shade under 90,000 shares a day.

Even so, the financials fit the profile of a growth stock, and that makes the dividend a welcome bonus to capital gains, not an end in itself.

On the Person's chart, MVO is trading above the weekly midline, and well above last week's upper pivot level.

Person's Table
ppspps openupper pivotlower pivot
MVO $35.30 $31.12 nov19 $37.59 +6.5% $33.16 -6.1%

MVO is trading in blue-sky territory -- each day's high, including today's is an all-time high.

Reversal Levels
  • $35.86, +1.6% (all-time high)
  • $35.30 --- You are here.
  • $33.53, -5.0% (last week's low)
  • $32.40, -8.2% (20-day moving average)
  • $29.92, -15.4% (nov. swing low)

Ultimately, the difference between MVO as an income play and MVO as I see it with the present bull play is how I think about the position once it is in my portfolio.

As an income play, I would focus on the ex-dividend date, and would be reluctant to exit beforehand, because I want to capture that payment.

For this position, the dividend is secondary. A bear signal on Person's Proprietary Signal or a drop below very near term support, set with last week's low, then I'll jackrabbit out and live to trade another day.

The dividend, in a world without income plays, is simply an element of total yield, one that is easily overwhelmed by considerations of capital preservation.

The dividend's greatest influence on such trades is in my decision to buy shares rather than options. (Although MVO has no options, so shares are the only game in town.)

Tim Bovee, Private Trader tracks the trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.

  • h-a trend - Heikin-Ashi trend.
  • obv - On-Balance Volume.
  • pps - Person's Proprietary Signal.
  • psar - Parabolic Stop and Reverse
  • ma20 - 20-day moving average
  • ma50 - 50-day moving average
  • ma200 - 200-day moving average
  • macd - Moving Average Convergence-Divergence

About the glance: The colors indicate the state of each signal.
  • Signal Section:
    • pps, psar, macd: green for bull mode, red for bear.
  • Confirmation Section:
    • obv: green for uptrending, red for downtrending.
    • h-a trend: green for uptrending, red for downtrending.
  • Environment Section:
    • ma20, ma50, ma200: green for above the average, red for below the average.

No comments:

Post a Comment