Drill Bit to Burner Tip®
Broad Exposure to US Energy Revolution
Holdings include not only obvious beneficiaries, such as energy producers and transporters, but also less obvious manufacturing and services sector beneficiaries that are experiencing growing demand, and improving cost structures, as a result of booming production and supply.
Old Industries, New Innovations
The confluence of proven technologies, which only recently enabled companies to tap previously inaccessible US oil and gas supplies, continues to evolve. Capital and profits are flowing to those companies that, through innovation, are improving the overall efficiency of energy production, transportation and consumption.
Defense Against Inflation and Deflation
Energy usage is forecast to rise indefinitely, but commodity prices are cyclical. Given exposure to both producers and consumers of domestic energy, portfolio returns over time should track overall energy volumes, rather than prices, providing a natural hedge against inflation as well as deflation when the economy is slow.
Drill Bit to Burner Tip® (No K-1s)
Miller/Howard Investments also offers a version of Drill Bit to Burner Tip® which excludes K-1s.
Drill Bit to Burner Tip® is an equity portfolio that leverages more than two decades of our expertise and experience investing in the energy commercial value chain. The portfolio encompasses companies exposed to all stages of the North American energy revolution such as producers, transporters, processors, distributors, enablers, as well as energy-intensive industrial companies poised to benefit from newly abundant supplies. Portfolio holdings include those companies tasked with improving environmental health, safety and efficiency of US shale oil & gas drilling, as well as those reaping economic and environmental benefits by shifting consumption to cleaner burning natural gas. The result is a single-themed, multi-faceted strategy designed to capture the benefits of the American economy’s ongoing return to energy self-sufficiency.
We agree with former Exelon CEO John Rowe, who referred to the nation’s shale gas boom as “the biggest transformation to the US energy marketplace” and “the single most disruptive technology” seen in the past five decades. It’s an exciting time to be involved in America’s natural gas renaissance, and our aim is to stay at the leading edge of this fast-moving energy trend so we can take advantage of new discoveries, technologies, and developments as they unfold. In keeping with Miller/Howard’s golden rule of investing, we emphasize high-quality stocks with high yield and strong dividend growth.
Our investment objective is to create a balanced portfolio in the North American energy value chain of producers, processors, transporters, and users, providing multi-industry exposure to this newly abundant fuel and its rapidly increasing use. Many companies in our universe provide steady and rising income, which we hope to combine with the numerous opportunities for capital appreciation.
The portfolio is team managed. Our strategy is designed to participate in all stages of the North American energy value chain: Exploration and production, pipelines, processing, storage, infrastructure builders/drilling services, chemical companies, transportation, and electric utilities.
We select businesses that feature special expertise, new discoveries, and/or a unique geological or geographical location. We look for those that have the ability to raise capital for asset creation and demonstrate reasonable certainty of cash flow. We like companies that are monopolistic—for example, they own rights of way that are difficult to reproduce, or their gas ownership is protected by federal, state, or local laws. We seek stability and growth in a single package.
All along the chain of commerce, from producer to end user, we invest in companies that benefit from increased volumes or increased demand, and current low prices that further boost demand. Other positive attributes for an investment include insider buying, potential M&A activity, and diversification success. We sell when a company’s fundamentals have weakened; the stock is overvalued; there are problematic regulatory issues; or we favor a more attractive investment with a better risk/reward profile.
Strategy Inception Date: June 2011
Portfolio Manager: MHI Investment Team
Contact MHI for portfolio information and performance data. If you are an advisor/financial professional, you may log on to our Advisor site to to access strategy information.