2024-02-09 06:34:01 ET
Summary
- Permian Basin Royalty Trust has underperformed the market and its sector, with a total return of -9% compared to the S&P 500's 26% rally.
- The trust's underperformance is due to disappointing business performance and the risk of oil prices falling below $70.
- The stock remains unattractive due to its high risk, declining output, and lackluster distribution yield.
In the summer of 2022, I recommended selling Permian Basin Royalty Trust (PBT) due to its excessive risk, given the multi-year high stock price and the high cyclicality of the oil and gas industry. A few months later, I reiterated my bearish thesis, despite the positive effect of the deep production cuts of OPEC and Russia on the stock. Since my first article, the stock has dramatically underperformed the broad market, as it has offered a total return of -9%, whereas the S&P 500 has rallied 26%....
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Permian Basin Royalty Trust Remains Unattractive, Despite Its Plunge