PBT - Permian Basin Royalty Trust: High Uncertainty - High Risk
2025-06-03 08:41:54 ET
Summary
- Permian Basin Royalty Trust remains a sell due to weak business performance, low yield, and a poor oil market outlook.
- Current 2.0% distribution yield is well below historical averages, signaling overvaluation despite a 60% price drop from its peak.
- No signs of improvement in operating costs or oil prices; upside risks are speculative and not a sound investment strategy.
- Long-term underperformance versus the S&P 500 highlights the risk; I recommend waiting for a sector downturn before considering entry.
In late 2020, I recommended buying Permian Basin Royalty Trust ( PBT ) for its attractive yield and its expected recovery from the coronavirus crisis. Since that article, the stock has vastly outperformed the S&P 500, as it has offered a total return of 345% whereas the index has rallied 60%. I became bearish on Permian Basin Royalty Trust in mid-2022, when I recommended selling the stock due to the breathless rally that the stock had enjoyed until that time and its resultant rich valuation from a long-term perspective. Since that article, the stock has dramatically underperformed the broad market, as it has offered a total return of -23% whereas the S&P 500 has surged 51%....
Permian Basin Royalty Trust: High Uncertainty - High Risk