Tag Archives: nasdaq

VWELX: This 86 Year Old Fund Is Still An Ideal Choice For Retirement

Summary Vanguard Wellington is the first balanced fund in the U.S. having launched in 1929. The fund has ranked in the top 10% of its Morningstar peer group over the past 5-, 10- and 15-year periods. The fund has a beta of 0.65 compared to the S&P 500 while outperforming the index over the long term. Wellington held up remarkably well during the 2000 and 2008 bear markets. In a world where there are literally thousands of funds and ETFs available that cover almost every niche, sector and style available, sometimes it’s the most tried and true investment vehicles that still remain the best choices. In the case of the Vanguard Wellington Fund (MUTF: VWELX ), we’re talking about literally the oldest balanced mutual fund in the country. Launched all the way back in 1929, Wellington looks to maintain a balance of roughly two-thirds of assets in conservative large cap stocks and one-third of assets in a mix of high quality bonds. It’s this type of asset allocation that makes for an ideal core holding in many retirement portfolios. Historically, Wellington has provided exactly what retirement investors should be seeking – above average returns with below average risk. With a current beta of 0.65, you’d expect the fund to return about two-thirds of the SPDR S&P 500 Trust ETF’s (NYSEARCA: SPY ) return but over the past 20+ years that hasn’t been the case. VWELX Total Return Price data by YCharts Looking at the past 2+ decades of history is especially appropriate because it takes into account both bull and bear market environments. The fund has performed about how one would expect – outperforming the S&P 500 in a down market but trailing in an up market. The fund’s risk minimization strategy proved especially effective during the Nasdaq bubble providing a relatively steady market performance given the economic environment. While the chart above doesn’t illustrate Wellington’s performance during the financial crisis particularly well but you can see below how well the fund held up. VWELX Total Return Price data by YCharts While the S&P 500 dropped around 55% from its 2007 peak, Wellington was down about 35%. That’s roughly what you’d expect considering the fund’s 60/40 allocation but the fund’s long term performance has been exceptional. Over the last 10 years, the overall performance of Wellington and the S&P 500 has been almost identical. Using a more apples to apples comparison, Wellington has also outperformed the Vanguard Balanced Index Fund (MUTF: VBINX ) – a fund with a 60/40 stock and bond allocation – during the same 10 year period. Morningstar drops Wellington into the Moderate Target Risk bucket. While the fund has returned 8.2% per year since the fund’s inception, it has consistently ranked at the top of its peer group. Wellington ranks in the top 6% of its peer group over the past 5-year and 10-year periods and ranks in the top 4% in the past 15-year period. It’s this type of risk-managed performance history that retirement investors should be seeking out. Retirement income investors will also appreciate the fund’s 2.43% yield. The fund has a few dividend champions among its equity holdings and the bond holdings are almost entirely high quality corporate and Treasury securities ensuring that the fund’s dividend is secure and reliable. Conclusion I’m a firm believer that in the case of most retirement investors, simpler is better. Sophisticated investors may feel comfortable building a more complex portfolio using stock, sector ETFs, etc. but for those who want an all-in-one long term holding that they can just establish and forget about, it’s hard to imagine someone doing much better than Vanguard Wellington. The combination of strong long term performance, risk minimization and low costs make this an ideal core retirement holding even if it’s not as exciting as some of the newer niche products hitting the market today.

Clean Energy Fuels – Time To Go Long

Summary CLNE is set for another disappointing year as weak natural gas prices have curtailed the company’s growth despite an increase in its volumes, but investors should not lose hope. CLNE achieved positive EBITDA last quarter on the back of its cost-reduction efforts, which is commendable if we consider the challenging end-market situation. The registered number of medium and heavy duty vehicles running on natural gas in the U.S. is expected to increase from 0.25% in 2012 to approximately 3.8% in 2023. As CLNE’s end-market grows, it will see an increase in its addressable market that will lead to growth in gallons delivered and help it post better financial results going forward. Natural gas refueling company Clean Energy Fuels (NASDAQ: CLNE ) had started the year with a lot of hope and was trading at 52-week highs at the beginning of May. But, the second half of 2015 ensured that Clean Energy is set to post another disappointing year as it has lost half its value in the past six months. The weakness in the company’s stock price can be attributed a declining financial performance due to weak natural gas pricing. For instance, in the third quarter, Clean Energy’s revenue was down 11% from last year, while it also posted a loss due to a decline in the value of gallons delivered. But, in my opinion, investors should not ignore the improvements in Clean Energy’s performance as the company seems to be on track for long-term gains. In this article, I’m going to take a look at the various reasons why Clean Energy can come out of its slump. Cost reductions indicate that Clean Energy is moving in right direction Though Clean Energy posted a loss last quarter, the company was able to reduce the quantum of its loss. Clean Energy’s loss was down 21% sequentially and 15% year-over-year in the previous quarter. The decline in its loss can be attributed to Clean Energy’s cost reduction efforts and volume growth. For instance, the company has reduced its SG&A expenses by over 20% in the past five quarters and increased its volumes by more than 24%. These are commendable numbers, especially considering that weak oil prices have created an adverse impact on natural gas vehicle conversions. In fact, Clean Energy improved its volume by 17% to 80.6 million gasoline gallon equivalents in the third quarter. What’s more important is that Clean Energy, for the first time, reported positive EBITDA of $3.1 million last quarter despite the low pricing environment. This represents an improvement of $5.7 million over the second quarter of 2015 and an improvement of $8.7 million over the first quarter of 2015. In fact, for the first nine months of 2015, Clean Energy has improved its EBITDA by a whopping 62%. The following table clearly indicates the improvement in Clean Energy’s EBITDA performance. Source: Press Release Hence, as far as operational improvements are concerned, Clean Energy Fuels is moving in the right direction by reducing costs, which is why it has been able to improve its EBITDA remarkably. But, apart from cost reductions, there is another positive about Clean Energy Fuels, in the form of a booming end-market opportunity, which investors should not ignore Growing end-market opportunity strengthens the bull case Looking ahead, Clean Energy Fuels will benefit from a growing number of natural gas vehicles in the U.S. According to a report published by the Fuels Institute, natural gas vehicles are expected to grow substantially in the coming five years, particularly in the medium and heavy duty market. It is expected that the NGV share of registered M/HD vehicles will grow from 0.25% in 2012 to approximately 3.8% in 2023. The following chart shows the expected increase in natural gas vehicles on U.S. roads going forward in both base and aggressive cases: Source The report states that the majority of vehicles using CNG systems will be found in the class 8 category of heavy duty vehicles. This is because these vehicles will benefit from lower fuel costs, combined with significantly higher fuel consumption annually, which will provide returns on vehicle investment quickly. In fact, Clean Energy has already penned a number of agreements with fleet operators, which is an indicator of the fact that the company is already gaining traction for its business. For instance, last quarter, Clean Energy expanded its relationship with Raven Transport. Raven Transport deployed an additional 40 LNG trucks last quarter, and these trucks will refuel at Clean Energy’s stations on interstate corridors throughout the southeast. All in all, Raven now operates 223 LNG trucks in its fleet. Likewise, Clean Energy is also expected to benefit from its relationship with Saddle Creek Logistics, which recently announced that it will be adding 50 CNG trucks to its existing fleet of 200. These new contracts indicate that Clean Energy will see an increase in its natural gas volumes going forward, and as the overall market expands, the company will see better opportunities to expand its volumes. Conclusion Despite the downturn in the end market, Clean Energy has managed to improve its EBITDA performance this year. At the same time, its volumes have also increased, indicating that the demand for natural gas vehicles is still there despite low diesel prices. In the long run, as the number of NGVs on the roads increases, Clean Energy Fuels will see an increase in its addressable market and will be able to improve its financial performance. So, in my opinion, investors should go long Clean Energy Fuels and take advantage of the drop in its stock price for long-term gains.