Vanguard Natural Resources, LLC (VNR), Chesapeake Energy Corporation (CHK): Key Traits of a Great Retirement Investment

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How will you spend your golden years? Photo credit: Author

Retirement is probably the one concept I think least about. I have at least three decades until I’ll be even close to retirement age. Even when I reach it, like most Americans, I’ll probably continue to work in at least some capacity. That being said, the key to being in the position to choose what I’ll be doing in my golden years are the decisions I make today.

That’s why I’m always on the lookout for great stocks that I can hold on to for the long-term. While these exact companies might not stay in my portfolio for the next thirty years, the foundation upon which they are built is strong enough to last a lifetime. One company with a foundation built to endure is Vanguard Natural Resources, LLC (NASDAQ:VNR). There is actually a great lesson to be learned by taking a closer look at the foundation Vanguard is building by reviewing the five key strategies (link opens a PDF) that drive its business.

High quality, low risk asset portfolio
Vanguard Natural Resources, LLC (NASDAQ:VNR)’s business model is to buy up known oil and gas reserves that will produce strong cash flow for years to come. It’s usually not shopping in the clearance isle, nor is it looking to pay a premium for the choicest of assets. Instead, it’s in the Warren Buffett mode of buying great assets at fair prices. So, while Vanguard Natural Resources, LLC (NASDAQ:VNR) might be buying an oil well, the same can be said for any asset an investor buys, quality over quantity will go a long way to ensuring retirement bliss.

Disciplined acquisition strategy
Far too often companies grow for the sake of growth. The American natural gas industry led by Chesapeake Energy Corporation (NYSE:CHK) has for years outspent its cash flow in order to grow its production. That was working when natural gas prices where high, but when prices crashed all the debt the company racked up forced it to sell assets just to pay its bills. Only more recently has Chesapeake Energy Corporation (NYSE:CHK) become more disciplined and has decided to live within its cash flow. Vanguard on the other hand has remained disciplined, while it reviews nearly 150 deals each year, it might only close on two of them. Bottom line, invest in a company that’s disciplined in how it spends money.

Active hedging program
Another facet of Vanguard Natural Resources, LLC (NASDAQ:VNR)’s business model is to lock in its cash flow several years into the future. While it might not earn as much if prices spike, it also won’t lose its shirt if prices collapse. The company takes a long-term view, something few companies or investors do today. Managing for the future is the first step toward ensuring that there actually will be a future for the company, so look for companies that are looking out over the long-term.

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