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  • First Look - FSFR [View instapost]
    I edited this post to show my NII projection - which is based on a potentially low ball projection for TII. The purpose of that text was "to show the simple math behind the projection" - and NOT to project a low ball number. I also wanted to show that there was lots of optimism in that falling (from Q4) projection.
    I also hope this reminds my readers of the ivory tower findings that there is more optimism in negative projections than there is in positive projections. That finding can be found in "From The Ivory Tower - Part Four" of 6-25-14. And this is also evidence that the ivory tower knows stuff that us simple folk also need to know.
    Apr 16, 2015. 08:06 PM | Likes Like |Link to Comment
  • First Look - FSIC [View instapost]
    MarcRogers - thanks for your comments.

    The numbers I am using for 'distributions per quarter' is directly from a FSIC created investor presentation.

    In this instance, I am going to choose to be inconsistent. I use regular dividend to assess coverage in all other BDCs. While the 'regular' dividend for FSIC is covered - the quarterly payout is not for the last two quarters of a short period of existence. That makes me uncomfortable with FSIC.

    IMHO, an 8.71% yield (based on the regular dividend) for FSIC is too dang low. FSIC is priced (based on yield) to be another ARCC. There are quite a few similarities. I really need a longer track record from FSIC before I would assess that it merits having a similar valuation to ARCC.
    Apr 16, 2015. 11:11 AM | 1 Like Like |Link to Comment
  • The MLP Story That Few Appreciate, And How To Make Money From Their Mistake [View article]
    dbacker wrote: "The guidelines I've used for utilizing the P/DCF metric are 15 is the beginning of too rich territory and 10 is the beginning of bargain territory."

    First - thanks for your long reply of UBTIs.

    While those are OK guidelines for middle CAGR options - I strongly believe that an acceptable price/DCF needs to be context sensitive to the RRRs and the CAGRs. Using such a guideline, you would be able to purchase the ultra-high CAGR options only during a period of deep crisis.

    I would expect that being 83 has the potential to change your perspective about buying something with a 2% yield - where it will take a decade or more for the yield to rise to a level that the payout is attractive. So . . . not only is there a need for the price/DCF guide to be context sensitive to the MLPs CAGRs -- it needs to be context sensitive to the purchaser's age. Thus your guideline works for you - but not so much for 61 year old me.
    Apr 7, 2015. 11:54 AM | Likes Like |Link to Comment
  • The MLP Story That Few Appreciate, And How To Make Money From Their Mistake [View article]
    1 - After three straight years of strong intra-year upgrades in the DCF projections in 2011, 2012 and 2013, PAA had multiple quarters of DCF shortfalls in 2014. In a 'what have you done for me lately' world - this is a fair amount of bad news.
    2 - My 'last five years' DCF growth average has fallen to 5% - which is well below trend.
    3 - The current distribution/DCF ratio is 90% - while the ratio was in the 60s in 2012 and 2013.

    That is the bad news - now the good news:
    1 - Despite the DCF shortfalls in 2014, the long term trend says that PAA has well above average DCF projection accuracy.
    2 - PAA is one of only three MLPs with a credit rating of BBB+.

    In summation - PAA has RRR good news and CAGR bad news.

    If distribution growth falls to 7% for PAA, then dividend growth is going to fall for PAGP. With PAGP selling at a 2.86% yield of 3-31-15 - it is my perception that PAGP is not priced for a dividend growth rate that falls from the LTM increase of 27% to rate a pace that could be as low as 18%.

    All of my CAGR projections are is some degree of danger of falling. With GP CAGRs being multiples of their MLP distribution growth, significant falls in the GP CAGRs are becoming an increasing possibility.

    Due to my lack of confidence in the GP CAGRs - now is a very inappropriate time to be publishing anything about GPs. Also, given my level of CAGR uncertainty, I do not currently believe that GPs are under valued. This uncertainty that I feel is not currently reflected in the GP yields.
    Apr 4, 2015. 10:00 PM | 5 Likes Like |Link to Comment
  • The MLP Story That Few Appreciate, And How To Make Money From Their Mistake [View article]
    Rohrshack - I have provided a link (the 2nd link in the article above) to my article "Get Skeptical About This MLP Claim" of 1-27-14 - where I have provided the 'historical DCF projection accuracy' spreadsheet - one of the key metrics I used to set my RRRs.

    ETP's credit rating is BBB- and the yield on the 2020 bond is 3.035% (compared to 2.457% for EPD and 2.666% for OKS). This data can be found at the finra-markets dot morningstar dot com web site. (The Seeking Alpha text editor incorrectly shortens the URL when typed the correct way.)

    My goal is to 'liberate investors from the chains of borrowed opinions by teaching metric awareness that leads to the formation of your own opinions'.

    I would prefer that you first provide YOUR assessment based on the data, then ask for my second opinion (plus any other opinions that this audience might offer). I want to provide a model that assist you into become the captain of your own ship.
    Apr 4, 2015. 07:27 PM | 6 Likes Like |Link to Comment
  • The MLP Story That Few Appreciate, And How To Make Money From Their Mistake [View article]
    CincinnatiRick - I no longer track MLP CEFs. Attempting to time the investments in straw houses is a task well above my pay grade.
    Apr 4, 2015. 04:07 PM | 1 Like Like |Link to Comment
  • The MLP Story That Few Appreciate, And How To Make Money From Their Mistake [View article]
    Rohrschack wrote that he "would appreciate knowing which MLPs you currently would identify as bricks".

    In this environment of extremely commodity price volatility, I would restrict the brick classification to three stocks - EPD, MMP and WES. Normally, I would label all the large cap midstream MLPs + WES as bricks.

    I am concerned about CAGR projection volatility. I think all of my CAGR assessments are vulnerable to potential downgrades this year. As you should know, valuations are heavily based on CAGR projections. What happens when energy moves from being one of the best growth stories of early 2014 to a sub-par growth story in mid-2015? The worst case scenario is scarey.

    I publish my "yield + CAGR - RRR" spreadsheet several times a year. You could find an old spreadsheet in my prior Seeking Alpha articles. But . . . all those old spreadsheets are based on old metrics - which decrements their utility in the here and now.
    Apr 4, 2015. 04:03 PM | 1 Like Like |Link to Comment
  • The MLP Story That Few Appreciate, And How To Make Money From Their Mistake [View article]
    If there was a current UBTI collection effort (and I am not aware of one), then they would still be in the process of collecting 2014 data. So 2013 would be the most recent data collected.

    I have posted one data set from the 'Investor Village' UBTI collection effort for tax year 2011 in my Seeking Alpha InstaBlog on 9-04-13. The data is not that old - but the coverage universe has significantly expanded. That data is the result of more than 100 hours of labor in collection, verification and presentation.

    There are no "anticipated future UBTI" numbers in existence - because each investor (in each MLP) has their own near unique calculation of UBTI. Put in different words - even though we might both own EPD, I will have purchased it at a different price - had a different set of expenses - had a different calculation for depreciation - and other factors that go into the UBTI calculation - so I would have a significantly different UBTI calculation than you.

    The information provided above is information that I can provide "with confidence". And this is where my confidence ends. I am not a tax guy. I turn my taxes over to a CPA. I am not the source to be asking tax questions on MLPs. I can tell you to "be careful out there" searching for tax information on the web. There is a lot of it -- and most of it appears to me to be bad.

    It is my overly conservative opinion that if you do your own taxes and want to produce a tax return with which you can have 100% confidence - then stick with the 1099 reporting MLP ETNs and 1099 reporting MLP-related c-corps. All my tax returns have been done by a CPA since I began investing in MLPs. It is my observation that most MLP investors (I lack the polling numbers to support this) still do their own taxes - and find a way to overcome the obstacles of tax-prep.
    Apr 4, 2015. 02:08 PM | 1 Like Like |Link to Comment
  • The MLP Story That Few Appreciate, And How To Make Money From Their Mistake [View article]
    Dividend House - I limit my coverage universe to MLPs, E&Ps and GPs where I can find three DCF projections. The DCFs for the GPs are more akin to EPS than it is with the MLPs - but there are still differences. Currently, I only have one source of DCF projections for SE - so it is not in my coverage universe. Last three year dividend growth for SE has been just under 10%/year. I would be more likely to give SE a near 10% forward CAGR - while the earnings CAGR found at Yahoo is only 5%. So . . . a yield plus CAGR of 14 is reasonably attractive (but compared to other GPs - a 14 is a bit low). I lack the metrics to do a RRR assessment on SE.

    If you require a 4% yield from your next MLP-related investment - SE appears to be a good option. I am more comfortable suggesting WMB because it is in my coverage universe. But SE has a better bond rating than WMB - and WMB oscillates on their forward growth projections.

    Bottom line - I lack the information to offer an opinion that is worthy of giving much weight. But from what I know, SE looks pretty good.
    Apr 4, 2015. 01:02 PM | 3 Likes Like |Link to Comment
  • The MLP Story That Few Appreciate, And How To Make Money From Their Mistake [View article]
    Ron3637 - I failed to do a sufficient proof read to catch the omission of the DCF acronym. DCF = Distributable Cash Flow. DCF is to MLPs what normalized FAD (Funds Available for Distribution) is to REITs. (FFO is the most popular REIT earnings metric - but dividend/FFO ratios do a poor job in explaining dividend safety and forward projections of dividend growth - IMHO.) DCF is the key earnings metric that one should use in MLP valuation assessments.

    In a prior Seeking Alpha article with the title "The Evidence That MLP Valuations Are Based On DCF And Not EPS" - I provide the stats to justify my conclusion (which is atypically the consensus opinion) that DCFs are the key MLP earnings metric.
    Apr 4, 2015. 11:59 AM | 4 Likes Like |Link to Comment
  • The MLP Story That Few Appreciate, And How To Make Money From Their Mistake [View article]
    Emerald - I own units in GEL and I like GEL - but GEL is not one of the "brick houses". The historical DCF projection accuracy for GEL is pretty close to average - and the credit rating is much worse than average. It is the "yield + CAGR" that makes GEL attractive. If you have disclosed your full MLP (and MLP related GP c-corps) - then you have a relatively low risk MLP portflio. So . . . there is nothing wrong in owning a big of GEL.

    NGLS is a moderate risk G&P (compared to other G&Ps - and that sub-sector does have more risk). NGLS has a pretty good history.

    I really like it when I see MLP portfolios with a strong weighting in GPs. And you have one of those portfolios. I would suggest that you consider looking at the 'refinery logistic' MLPs for another source of high CAGRS - not that you really need another high CAGR MLP. But you appear to have an appetite for growth.
    Apr 4, 2015. 11:16 AM | 5 Likes Like |Link to Comment
  • The MLP Story That Few Appreciate, And How To Make Money From Their Mistake [View article]
    Give the size (in dollars) of IDR payments by the MLP to its GP -- it is logical to believe that IDRs matter. And it is true that the distribution growth of the GPs is significantly superior to the MLP.

    On the other hand, the stats surprisingly do not make the case that you should own (or prefer) MLPs without IDRs compared to MLPs with IDRs. Go back to the 'data since 2010' spreadsheet and observe the growth in DCF per share. In this instance - omit MMP. There are two MLPs without IDRs -- EPD and BPL. The growth in their DCFs and distributions has been average. The DCF and distribution growth by OKS and PAA is superior to EPD and BPL.

    Put in different words -- one would think that "investing with IDR awareness" would be just as important as "investing with CAGR awareness". But that has historically not been the case.

    Compare the growth of NGLS (which pays IDRs to TRGP) to MWE (which purchased its GP - and now pays no IDRs). NGLS has superior distribution and DCF growth to MWE since 2010. And that is the case despite MWE having the attractive "Marcellus growth story".

    In summation - the IDRs should tell you to buy the GP over the MLP. It should not tell you to avoid the MLP with IDRs over the MLP without them.
    Apr 4, 2015. 08:34 AM | 13 Likes Like |Link to Comment
  • What I Own - Or My 4 Year Forward Portfolio Income Spreadsheet [View instapost]
    The stocks that make up the MLPL have a history of rising distributions - and MLPL has a GREAT history of rising dividends. The average MLP is an OK stock.

    The stocks that make up the BDCL have a history of several components having dividend cuts - and the dividend from BDCL is 'oscillating' -- I cant really say that it has a direction. The average BDC is not so great of a stock.

    With a fairly high percentage of my holdings in individual stocks, I believe that I should have a decent amount of diversification in that group of holdings.
    Mar 28, 2015. 11:06 PM | 1 Like Like |Link to Comment
  • What I Own - Or My 4 Year Forward Portfolio Income Spreadsheet [View instapost]
    I believe I own too many MLPs. At the same time - I recently purchased four (plus in leveraged ETN) when I sold two. What's up with that?

    I believe that one HAS to gamble on high CAGR stocks -- or you will lose to the sector average. I hate to lose to the sector average. Most high CAGR stocks will work out as projected. A few will not. So I buy high CAGRs 'in baskets'.

    One of my favorite stories comes from 2010 - when I purchased the high CAGR basket of EPB (El Paso), GEL and WES. Kinder purchased the GP of EPB - killing that stock. (I broke even on that one.) GEL worked out as expected. WES grew even faster than expected.

    To some degree, (or in my own mind) I did not buy four stocks when I purchased MPLX, PSXP, SHLX and TLLP. I purchased 'one basket' of high CAGR refinery logistic MLPs.

    There are black swan events that come and kill the growth stories of growth MLPs. It happens with enough frequency . . that the events should not even be called black swans.

    Here is what the historical numbers tell me -- High CAGR MLPs beat the sector average, year after year. Without the high CAGR MLPs, the MLP index would have a bad track record compared to the S&P 500. "Total return" investors need a high weighting in MLP growth to have a good total return.

    I am using the "basket' lesson learned from MLPs as I have expanded my portfolio into Health Care, Tech, and the Industrial, Packaging and Transportation trio.

    I am not doing very much trading. The numbers are doing a pretty good job of telling me what to buy.
    Mar 28, 2015. 10:45 PM | 2 Likes Like |Link to Comment
  • Business Development Company Update 3-25-15 [View instapost]
    While dividend growth and NII growth look very good -- the NAV is falling. I hate falling NAVs.
    CPTA's weighted average yield on debt investments, based on fair value, as of December 31, 2014 was 12.5% compared to 13.7% at December 31, 2013. High weighted average yield = risky investments.
    Q4-14 Total investment income of $13.5 million compared to Net investment income of $5.1 million. The NII/TII ratio is terrible.
    Those bad metrics need an explanation.
    Mar 26, 2015. 08:50 PM | 2 Likes Like |Link to Comment
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