Thursday, May 31, 2012

Example of investment at 32% a year over 9 years time

I wish I could find an opportunity like BP did in 2003 by investing in TNK.  In 2003 BP invested $6,5 billion in TNK in exchange for 50% stake. At that time BP  market capitalization was about $150 billion. Brent oil cost $30 a barrel.

TNK-BP production:
Today BP share of production from TNK BP accounts for 25% of the group production, while CAPEX is only 8%.
Up to 2011 BP  has received $19 billion in dividends from the venture. Or 32% a year, on the original investment, annualized.  BP as group paid 5.1% in 2011 to its shareholders.

To diversify my current portfolio I decided to invest some of the money into Vanguard Energy ETF (VDE). This pure domestic stock energy sector specific  fund with 100% exposure to equities.

This ETF (Exchange-traded fund) has following characteristics, according to Vanguard website:
Energy Sector mutual fund  Equity characteristics as of 04/30/2012

 Energy Equity sector Diversification

Expense ratio -0.19%, which would mean that over 10 years for investment of $10K I would only pay $481.
It offers  possibility to increase my position in USD currency and exposure to various energy sector companies.  Even with development of unconventional gas and oil it will be done by the same oil & gas companies, with service involvement.

This is NOT a financial advice, nor your should rely on the data.  Please seek independent professional advice for any financial movements /investments.

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