Whether you've been taking profits or simply have a lot of cash in your portfolio, it's always a tough to decide which stock to buy next. If you are lacking investment ideas, I have three companies that offer great long-term potential. While all three are geared toward oil and gas production, each offers investors a unique investment opportunity whether you are looking for growth, income, or both.
Investment idea No. 1: LINN Energy (NASDAQ: LINE ) or LinnCo (NASDAQ: LNCO )
For those who are not familiar with these income machines, LINN is structured like an MLP, meaning investors will receive a K1 come tax time. LinnCo on the other hand is structured like a normal C-Corp meaning investors will receive a Form 1099 each year. Because LinnCo's sole assets are units of LINN you can invest in either company depending on your tax preference.
Lately the pair have been under a lot of pressure after a series of negative attacks on LINN's business model. The attacks have brought the respective yields to around 9% for LINN and 8.5% for LinnCo when you take into consideration the soon to be rising payout after the Berry Petroleum (NYSE: BRY ) acquisition closes. Berry adds significant oil assets to the combined company and the deal significantly improves the reserves, credit metrics, distributable cash flow ratio, and production. The bottom line here is that investors can lock in significant monthly income by investing in either company.
Source: LINN Energy
Investment idea No. 2: SandRidge Energy (NYSE: SD )
If growth is what you are after, you might want to drill down into this high-growth oil producer. I think the company is a great buy as it's shares are downright cheap. I like the fact that SandRidge is focused on pursuing one major opportunity, its fundamentals are improving, and it has a very interesting catalyst on the horizon because its CEO's job is on the line.
What Sandridge offers is double-digit production growth with a focus on high-margin oil growth from its Mississippi Lime acreage. The company expects to grow its oil and natural gas liquids production by 19% overall, with Mississippian driving oil and natural gas liquids production growth at 64%. The business is financially sound; its growth plans are fully funded until 2015, and SandRidge has several options at its disposal to further extend funding of its plan. If you are looking for a high-growth oil play then Sandridge is a great company to explore.
Investment idea No. 3: ConocoPhillips (NYSE: COP )
I look at ConocoPhillips as a balance between both LINN and SandRidge. ConocoPhillips has a fairly high dividend yield, currently around 4.25%, while also offering steady growth. That growth will come via Conoco's plan to grow its production and margins by 3%-5% annually through 2017. When you add everything up, Conoco offers solid profit growth to go along with a nice dividend.
In addition to that stable growth and steady income, ConocoPhillips offers exploration upside thanks to the billions the company is pouring into finding new sources of oil and gas. The company is spending 15% of its capital budget to explore for oil and one of its most promising locations is in the deep water of the Gulf of Mexico. Conoco and its partners have already struck oil twice this year and it has a leading lease position in the Gulf, meaning that more finds could be on the way. That's why investors looking for an investment idea with a balanced approach to oil and gas production should look no further than ConocoPhillips.
Foolish bottom line
As I'm personally invested in all three ideas, I have confidence that each will succeed over the long term. The newest name to my portfolio, SandRidge, is the one that I'll be watching the closest over the coming year. While it has the greatest potential for upside, the company has stumbled mightily in the past and still has several obstacles to overcome.
SandRidge investors really need to watch the company closely over the next few weeks as its board makes a final decision as to which direction it will be heading. The current focus has it aggressively growing its liquids production which has its future looking optimistic. The board could decide to scale back on growth or pursue its strategic options. If you are looking to learn more about the future of this emerging oil and gas junior and are looking to find out more about its strengths and weaknesses, then check out The Motley Fool's premium research report detailing SandRidge's game plan and what to expect from the company going forward. To get started, simply click here now!
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