Bought Bristol-Myers Squibb, Swapped Pacific Coast Oil Trust for Permian Basin Trust

 After looking at Bristol-Myers Squibb (NYSE: BMY) and liking the stock, I've decided to put my money where my mouth is, so to speak. I opened a small position for an account I manage on behalf of a family member. As I've said on Seeking Alpha and elsewhere, I consider Bristol-Myers a quintessential example of 'Growth at a Reasonable Price.' 

In addition, I've sold all my shares of Pacific Coast Oil Trust (NYSE: ROYT). I just don't see the oil price regimen going anywhere right now, and that spells bad news for a trust that has a fairly high cost of production and needs to distribute in order to not be dissolved. ROYT ran another deficit last month, and time is beginning to run out. Even if ROYT does survive, there are only so many years worth of waterflood reserves in the ground. 

I switched it out for Permian Basin Royalty Trust (NYSE: PBT), and did so because Permian Basin Trust can at least distribute some cash to shareholders at these prices. PBT has a much lower cost of production, with a much longer reserve life using existing, waterflood technologies. 

Added shares of Pacific Coast Oil Trust, Johnson & Johnson

Last week I added shares of both Johnson & Johnson (NYSE: JNJ) and Pacific Coast Oil Trust (NYSE: ROYT).

Let me begin with my rationale for buying the latter. I added shares of ROYT because prices at $4 per share, the distribution yield on that should be around 30% when Brent recovers to $80. I say when, not if. I calculated that by taking the distribution ROYT paid when Brent was still at $80. ROYT has about 13 years left in its reserve life, not including any new steamflood wells its parent company drills (in which ROYT would get a 25% revenue interest). The yield isn't much right now because of low oil prices, but I am willing to continue waiting on this one.

As for J&J, I can get a decent price on it so I did. As I've mentioned in previous journals, I need added diversification away from just energy. J&J is a good, dividend-focused way by which to do that. The yield is 2.8%, which is not bad, and the company trades at 16.5 trailing earnings. Again, not terrible. I'm willing to pick some up, and I did. Looking forward to those annual dividend increases. 

Swapped MCEP for ROYT

This morning, first thing, I swapped out Mid-Con Energy Partners (MCEP) for Pacific Coast Oil Trust (ROYT). My reasoning is as follows: Since its acquisition in West Texas, Mid-Con no longer has a comprehensive hedging policy. Mid-Con only hedges out a couple quarters, and only slightly more than half of all oil production is hedged. I was not happy with the West Texas acquisition. It was done at the wrong time and left unitholders totally exposed to a decline in oil prices. There's no way that acquisition is going to be accretive. At least, not in the short term.

So, I swapped it out for Pacific Coast Oil Trust, which has similar waterflood acreage but is out in California. ROYT is a royalty trust, which means it does not hedge at all. But I'm OK with that because ROYT also has no debt to worry about and has an incredibly low cost base. MCEP, on the other hand, has moved into the Hugoton Basin and Gulf Coast Texas, both of which are higher-cost waterflood areas. That's not what I signed up for.

Felt a sense of relief wash over me when I did the trade. Sounds a bit silly but it's true. Now, all my upstream MLP exposure is in Linn Energy (LINE) and Memorial Production Partners (MEMP), both of which hedge appropriately. I am still comfortable with these two and hope to never sell either one. Also have a small amount of BreitBurn Energy Partners, but not much.