As I have been sharing with our readers over the years, I do not suggest anything I would not do myself. Today I am calling your attention to the Williams Companies, Inc. (NYSE: WMB) which I bought today at $13.00.I had already taken advantage of a negative market view on the stock by selling "naked puts" at a November $12.50 strike price receiving $2.25 per share. I have been touting this as a way to make some money if you truly are interested in owning the stock already. On the puts my break even position is $10.25, the same as the recent market bottom.
In any event I have been following this company for a while and decided it would be foolish to wait around in hopes it might drop again and miss out on the potential upside. The following chart illustrates a path that closely follows the price of natural gas.
The stock was recently mentioned in Barron's (subscription required) where they discussed gas prices falling by 65%. The stock story was followed up in a later issue about "Master Lease" opportunities paying very high yields ranging from 9% to 20%.
I decided I would rather own the stock, and that is currently yielding about 3.4%. But this is just the beginning. The price-to-book is 0.91 and the price-to-sales is 0.62. This metrics all compare favorably to the industry and the trailing P/E of 5.58 is only half.
Williams closed today at $13.47 giving me a slight profit for the day. At this point I intend to hold on to the stock long term. I am happy with the yield. I believe that energy prices are going back up sooner rather than later, and I like that WMB has it's reserves close to home and not in some war torn or politically unstable part of the world.
- Williams Companies is spending its energy refocusing on energy. It is engaged in gas gathering, storage, processing, and transportation, as well as oil and gas exploration and production. The company operates 14,200 miles of interstate natural gas pipeline, including the Transco system, which runs from Texas to New York. Williams has proved reserves of 4.1 trillion cu. ft. of natural gas equivalent.
Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm. He writes the columns Chasing Value and Serious Money. Disclosure: I own shares of WMB and options.
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