WPL@$30, page-306

An encouraging shift in sentiment this week. WPL went from $21.80 to $24.07 from Tues to Fri (up 10.4%) Brent up again overnight so oil and gas stocks should continue to be supported early next week.

Here’s where I’m at on this stock right now.

As I’ve said before I’m sympathetic to the green cause so holding WPL is a bit of a dirty secret.....it’s just that the financials short to medium term stack up so well I can’t resist getting dirty. What was particularly pleasing about this move from $22 to $24 was that it was POO/sentiment driven - I still think the real trigger for WPL roaring back into favour will be when the market wakes up to the effect of this higher POO on WPLs bottom line. It is generating massive cashflows right now.

I say short to medium term because I don’t see WPL as a bottom drawer stock. It’s days really do look numbered if you look ahead far enough but even with a full steam ahead global transition to renewables we’re looking at decades of oil and gas consumption along the way - the world is just too geared to oil and gas for it to happen in the next 5 to 10 years like some seem to think......and the political obstacles to new exploration/ development will only make oil and gas a more and more scarce commodity. This could drive the POO up to $100 plus and make these short and medium term years even more lucrative.

Developing countries like India will give the finger to the western countries trying to curtail their oil and gas use .....they’ll say ”F you guys - you get yourselves big and fat and wealthy in your world built on cheap oil and gas and now that you’re there you want to shackle our development with all your ‘green and clean’ BS.....you bastards’

So oil and gas will be around for decades yet and the cash will keep flowing into WPL. The dividend yield could get huge - grossed up 10% is not out of the question because the share price will be held back by the finite looking future of the company......but if the stock price sits at $30 for a year or two paying 10% dividends- I’ll take that - especially if I’ve enjoyed the magic carpet ride from $22.

So right now at $24 I still think it’s a strong buy - once it gets to $30 its a case of how long you want to collect the dividend before a possible decline in the sp ..... something like the AGL experience - have a look at its 5 year chart. Investors have been sucked in by its dividend yield of 8%,9% and now 10%....but the steady capital loss via the share price has made it a bit of a dog. You don’t want be on the WPL ride for too long once this starts to unfold.....and I guess in saying this I’m ruling out Woodside Petroleum Limited (WPL) reinventing itself and morphing over the next 20 years into WRESL ...Woodside Renewable Ethical Sustainable Limited.

Anyway - just naval gazing really - and this post is way too long ....but that’s my thinking and why I’ve been overweight WPL since last year ....and will continue to be at least until I see $30.