Thomas Lott
Long/short equity, deep value, special situations, hedge fund manager

Sell Your Linn Energy And Pick Up Pioneer Southwest At A Cheaper Valuation, Bigger Yield

Pioneer Southwest Energy (PSE), an oil and gas MLP based in Texas, has sold off lately along with many energy partnerships amidst weak commodity prices and legitimate concerns surrounding accounting practices in the industry. The good news for Pioneer is that, different from Linn Energy (LINE), PSE does not spend dollars purchasing puts to hedge its portfolio. It enters into costless collars and swap contracts to hedge its output. Therefore, there is zero concern at PSE regarding overstated distributable cash flow.

Even better, PSE trades at a bargain 9.04% yield, far higher than Linn's 7.5% yielding units, and sports a reasonable Distributable Cash Flow coverage ratio of 1.06x (almost identical to Linn's supposed DCF coverage ratio of 1.07x). More...

Join Seeking Alpha PRO to read this archived article and 11,574 other archived articles
IDEA GENERATORXExclusive access to 10 PRO ideas every day
INVESTING IDEAS LIBRARYXExclusive access to PRO library of more than 15,000 ideas
SECTOR EXPERT NETWORKXExclusive access to all sector experts for direct consultation
PERFORMANCE TRACKINGXTrack performance of all PRO stock ideas
PROFESSIONAL TOOLSXProfessional Idea Filters to zero-in based on industry, market cap and more
"In just the first month of using PRO, I used it to generate two ideas which were actionable for me. As a result of these two positions, I have earned more than 20 times the annual subscription costs for PRO."Michael Yagemann, Greenbridge Capital
"I am pleasantly surprised with the scope of small and mid-cap coverage PRO offers. You can't find that any where else."Patrick Rice, Mainstay Capital Management
You may cancel at any time for any reason, and receive a prompt refund for membership on months paid and not used (max. 6 months). Details