In MFI We Trust

One interesting group that is starting to appear en masse are trusts. Just pull up the list.

1. BP Prudhoe Bay Royalty Trust
2. Hugoton Royalty Trust
3. Mesabi Trust
4. Permian Basin Royalty Trust
5. San Juan Basin Royalty Trust

That is 5 in the top 100. Just for yucks, I'll throw Star Gas Partners LP into the mix. They are not a trust, but rather a partnership. I do own a little HGT (full disclosure). All of these are income producing stocks. All but MSB and SGU are oil and gas related. The Oil & Gas ones will clearly move with the price of oil. PBT, BPT, SJT and HGT are all priced about the same with relation to 2009 expected earnings.

When I look at Wikipedia it seems to me that Trusts really should not be in MFI. I haven't seen much discussion on this point, but it really goes back to "Good Businesses at Good Prices". You can make the argument that based on the MFI formula, which is backwards looking, that the trusts are cheap. But I don't think we'll be returning to $100+ oil for a few years. But are they good businesses? JG talks about Jason's bubble gum shop and how it can be replicated to grow earnings. The trusts are typically mature oil and gas fields, not looking to grow or spend a lot drilling but rather simply running off what they have got and sharing the income with us.

SGU seems the odd one, they just showed up and look interesting. They distribute heating oil. That is pretty recession proof. Obviously their earnings are seasonal. They just had a bang-up quarter, I suspect because they "distribute" the heating oil, and I believe their cost of goods sold dropped faster than their revenues.

The odd thing about SGU is they just announced a 6.8 cent dividend. I just assumed they had been paying that for a long time, as Yahoo shows a 10% yield for them. But going to their web site, this was their first dividned since 2004! Not clear whether it is to be regular going forward. I would not buy them unless I knew that.

Finally, a little OT but I saw where the Moose (Decision Moose) just shifted away from Treasury bills (which seemed like a bad idea to me) to Gold (which I like). I have decided to buy some gold and follow the Moose... though not with 100% of my assets. As I watch Obama and his first news conference (as President) while I type, it seems quite likely that inflation and a weakening US dollar are the next crisis after the current one. Gotta love jumping from crisis to crisis!