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Steve's note: We're following up on yesterday's idea for internationalizing your wealth with another "from your living room" strategy. If you want an easy way to add protection from a falling dollar to your portfolio, read on...

Wealth Protection Secrets from the World's Best Investor

By Matt Badiali, editor, S&A Resource Report
Friday, November 19, 2010

In late 2006, I introduced DailyWealth readers to one of my favorite wealth protection ideas…

I called it "Warren Buffett's Favorite Energy Hedge Fund."
 
I still think this "fund' is a great place to invest… especially for folks looking to protect their assets against a declining U.S. dollar.
 
 
The "fund" is one of the world's most diversified energy companies, ConocoPhillips (COP). If you're interested in a dollar hedge and large dividends, you should know what's going on with one of Buffett's favorite stocks…
 
With a market cap of around $90 billion, ConocoPhillips is one of the largest companies in America. And with a current dividend yield of 3.5%, it's one of the highest dividend paying companies in America. But what you probably don't realize is ConocoPhillips' balance sheet contains a powerful "escape the dollar" component. The company holds assets all over the world…
 
As you can see from the chart below, just 43% of ConocoPhillips' assets are in the U.S. The majority are outside the U.S.
 
 
Even more impressive from an international point of view is that ConocoPhillips generated 73% of its income outside the U.S. last year.
 
By many measures, ConocoPhillips is cheap right now. We can buy the company for just 5.8 times operating cash flow; just four times earnings before interest, taxes, depreciation, and amortization (EBITDA); or just $9 per barrel of reserves.
 
Market Cap
$91.9 billion
Operating Cash Flow (trailing 12 months)
$15.9 billion
EBITDA (trailing 12 months)
$22.5 billion
Reserves (barrels of oil equivalent)
10.3 billion
 
In 2010, ConocoPhillips paid out 88% more cash to shareholders than it did in 2005 – about $3.2 billion. And it has increased its dividend every year for the past five years by an average 12% per year.
 
When it comes down to it, many oil companies will give you the sort of dollar hedge that ConocoPhillips does. ExxonMobil (XOM) is another great idea here… along with Canadian oil sand producer Suncor Energy (SU).
 
What's important to remember is that when the dollar falls, the nominal value of oil rises… which produces larger dividends for you as a shareholder.
 
If you're concerned about the dollar and inflation, keep this idea in mind. This is one of Warren Buffett's great "escape the dollar" secrets… and it's out there for all to see.

Good investing,
 
Matt Badiali




Further Reading:

Don't miss yesterday's "from your living room" strategy for global asset protection. This program, from our retirement expert Dr. David Eifrig, actually pays you to participate. And you're unlikely to hear about it anywhere else. Get the details here: A Wealth Protection Program That Pays You to Join.
 
For another super-simple "antidollar" idea, check out Steve's recent essay on a global investment that has nothing to do with bonds, gold, real estate, or stocks. Best of all, you can't lose a penny. Find it here: Safeguard Against the Dollar with ZERO Downside Risk... Guaranteed.

Market Notes


"CHINDIA" IS GOING CRAZY FOR NATURAL GAS

Our next "Chindia" installment is a little cleaner than yesterday's...
 
Today's chart shows the huge growth in China and India's consumption of the "clean" hydrocarbon, natural gas. The fuel is used in the production of plastics and fertilizers, home heating and cooling, and to fire electrical power plants.
 
As you can see from our 30-year chart of natural gas consumption for both countries combined, Chindia is going wild for natural gas.
 
It takes sophisticated infrastructure – distribution pipes, compressors, and storage facilities – to use natural gas. So 25 years ago, Chindia used little of the fuel. But as the countries grew more prosperous, natural gas became (and will continue to be) a vital part of Chindia's energy supply... And this line will continue to head to the upper-right corner of this chart.


In The Daily Crux



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