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  • Making Sense Of Year To Date Price Changes In Midstream Master Limited Partnerships [View article]
    Gorgo asked "Which pipers do you think have the most upside going forward?"

    Upside comes mainly from distribution growth. Distribution growth comes partially from a good distribution to DCF ratio - partially from DCF growth. The easiest to spot (from a distance of several years) DCF growth comes from good drop down stories. That is the way it has been. That is the way it is. Odds are strong the future will be the same.
    Aug 30, 2015. 07:33 PM | 3 Likes Like |Link to Comment
  • Making Sense Of Year To Date Price Changes In Midstream Master Limited Partnerships [View article]
    Craps16 asked "the general partner of GMLP is GLNG and the gen partner of NGLS is TRGP. Why would both general partners have larger market caps than the LLC of which they are general partners?

    AMZN has a market cap of $242 billion and projected annual sales of $105.99 billion while WMT has a market cap of $209 billion and projected annual sales of $485.85 billion. AMZN has an EPS projection of $1.61/share while WMT has an EPS projection of $4.56/share. AMZN share price = $518.01 while WMT share price is $64.94.

    The "Why does TRGP have a larger market cap than NGLS" questions has the same answer as "Why does AMZN have a larger market cap than WMT". It is growth.
    Aug 30, 2015. 07:23 PM | 1 Like Like |Link to Comment
  • Making Sense Of Year To Date Price Changes In Midstream Master Limited Partnerships [View article]
    Pallasathena - I had not provided fresh MLP numbers since the Q2-15 earnings release. I wanted to get this data out ASAP to an audience that is more acclimated to my data intensive postings.

    I will have more articles on MLPs this quarter - and I will have more narrative in one or two of those. For the most part, I am a numbers guy that writes for number guys.
    Aug 30, 2015. 04:56 PM | 1 Like Like |Link to Comment
  • Making Sense Of Year To Date Price Changes In Midstream Master Limited Partnerships [View article]
    Hampton108 wrote: "from what little I can see, it looks like HEP, DKL, VLP and possibly MMLP are the only qualifiers" for superior MLPs candidates to use to replace an inferior one.

    DKL and VLP are newbie refinery logistic MLPs with high CAGRs, great distribution/DCF ratios, and growing DCF projections.

    HEP has great historical DCF projection accuracy. You get what you see. Or put differently - you can count on their projections. But . . . . HEP appears more leveraged than average (I lack fresh debt/EBITDAs and interest coverage ratios) - and has a sub-investment grade credit rating. Add to that, the "yield + CAGR" is too dang low. In this environment, I really like certainty - so I would not sell it. But the "yield + CAGR" would keep me from buying it.

    MMLP has a "historical DCF projection accuracy" record that is really, really bad. Specifically, a poor history is one full of unpleasant surprises. I do not give demerits for pleasant surprises. Add to that: DCF projections are flat and distribution coverage is low. I am much more selective than average. I want to own quality to such a degree that I am outside the norm. I am not touching MMLP.
    Aug 30, 2015. 04:43 PM | 1 Like Like |Link to Comment
  • Making Sense Of Year To Date Price Changes In Midstream Master Limited Partnerships [View article]
    Nikeoittus asked: "why you would not buy PAGP and TRGP today but would or at least continue to hold WMB".

    The data I provided in the above spreadsheets shows the dip in the 2015 DCF projections. All three (of the MLPs) have dips of similar size in 2015. WPZ has projected a bounce back in 2016 while the other two keep on dipping. The CAGR projections for NGLS and PAA have fallen more - the projection for WPZ has fallen less. And . . . . if things are going bad for the MLPs - it is even worse news for the GPs. Perversely, it may be good news that you can not put much faith in DCF projections in a volatile commodity price environment. Put in different words, you can not have confidence that the size of the projected DCF falls are accurate.
    Aug 30, 2015. 04:07 PM | 1 Like Like |Link to Comment
  • Making Sense Of Year To Date Price Changes In Midstream Master Limited Partnerships [View article]
    BESherman asked: Given the strong correlation between the oil prices and the MLP indices over the last year (regardless of whether or not that should be the case), and given the general consensus that oil prices are more likely to continue downward despite the bounce of the last few days, does this not bode ill for MLP prices until oil reaches a true bottom and begins a credible recovery?

    Factoids: Yes.

    BESherman asked: If you look at those management energy price and volume assumptions, they seem fairly rosy. Doesn't it bear looking at the price deck and volumetric assumptions used by MLP management teams?

    Factoids: To refresh my mind, I just looked at the "Intra-year Changes in DCF estimates by Year" for 2008 and 2009. We also had a dip in WTI during the credit crisis. Projection accuracy was a little was than average during those years. At this point in time, I gain a lot of comfort knowing that the projection accuracy was not SIGNIFICANTLY worse than average. You have a legit concern - absent the historical record. The record diminishes that concern in my eyes.
    Aug 30, 2015. 03:55 PM | 3 Likes Like |Link to Comment
  • Making Sense Of Year To Date Price Changes In Midstream Master Limited Partnerships [View article]
    Steve Rasher (and Hampton 108) wrote " I had difficulty getting the full picture of the charts when opened".
    I deleted one column - the distribution to projected 2016 DCF ratio - in an attempt to provide a spreadsheet that can be fully displayed here.
    Aug 30, 2015. 03:43 PM | Likes Like |Link to Comment
  • Making Sense Of Year To Date Price Changes In Midstream Master Limited Partnerships [View article]
    I have two formulas for generating "price implied CAGRs". Those metrics are used MAINLY to make valuation assessments, but they are also a part of the process in setting CAGR projections. With prices down as much as they are, the price implied CAGRs are probably poor tools in setting CAGRs.

    I can afford to lose one tool (price implied CAGRs) in setting MLP CAGRs because the DCF/distribution ratio is such a great tool in setting CAGRs. GPs strongly tend to pay out all of the DCFs in dividends and distributions. So I lack a good 'fall back' metric when I lose GP price implied CAGRs.
    Aug 30, 2015. 10:14 AM | 3 Likes Like |Link to Comment
  • Making Sense Of Year To Date Price Changes In Midstream Master Limited Partnerships [View article]
    Nikeoittus requested the inclusion of the GPs (the IDR owning General Partners) in my next article.

    That is a legit request - but I am reluctant to do that right now. A heck of a lot of the valuation for the GPs is based on their dividend or distribution CAGRs (projected Compound Annual Growth Rates). I have lost confidence in the brokerage CAGRs. And the projections I am able to construct based on analyst provided DCF projections have been very volatile. Specifically, OKE, PAGP and TRGP growth rates have fallen from great to near zero in a short amount of time. I would call volatile CAGRs near meaningless CAGRs. And if CAGRs are that volatile, then the Required Rates of Return need to be adjusted much higher than I currently have them.

    Historically, the GPs have been attractive due to their significantly higher dividend and distribution growth. At this point in time, one can find great distribution growth outside of the GPs. If you want high growth, buy AM, DM, MPLX, PSXP or SHLX. But even with those - there is a question as to how long the superior growth will last. Given their very low yields, it needs to last more than five years to justify their current valuation. Given the current level of uncertainty, it is hard to have faith in projections that are more than five year out.

    I have never written a "your guess is as good as mine" article because I had the numbers that justify good CAGR projections. Up until now, "investing with CAGR awareness" has been a winning recipe. Until the dust settles and I can once again write with sufficient certainty, I want to stay quiet when the subject of GPs comes up. I still own PAGP, TRGP and WMB. I would not buy PAGP and TRGP today - due to the higher level of uncertainty. I may not own them at the end of the year.
    Aug 30, 2015. 09:46 AM | 11 Likes Like |Link to Comment
  • Making Sense Of Year To Date Price Changes In Midstream Master Limited Partnerships [View article]
    I just posted a stat update on my coverage universe of older ETNs in my Seeking Alpha blog - with the link being http://seekingalpha.co...

    Since the beginning of 2011, the price of AMJ, AMLP and MLPG has fallen. The prices of MLPI, MLPN, MLPW and the leveraged ENT MLPL are all up - but up less than 10%. At the same time, SPY (one of the S&P 500 ETFs) is up 58%. Using the standard of 'yield plus price appreciation', the best of the non-leveraged EFT/ETNs is MLPW with a 34.41% return. MLPL has a 66.62% return. SPY has a 70.26% return. If you are interested in yield plus forward dividend growth, the group has a poor record on that standard, too. AMJ and MLPW are paying lower dividends in Q3-15 than in Q3-14.
    Aug 30, 2015. 09:10 AM | 3 Likes Like |Link to Comment
  • Using Ares Capital Corporation Data To Illustrate BDC Complications [View article]
    The following is from MarketBeat.com

    ARCC was upgraded by stock analysts at Raymond James from a “market perform” rating to an “outperform” rating in a report released on Friday (8-28-15), The Fly reports. The brokerage currently has a $17.00 target price on the investment management company’s stock. Raymond James’ price objective would suggest a potential upside of 10.61% from the company’s current price.

    Several other brokerages also recently weighed in on ARCC. BB&T Corp. reissued a “hold” rating on shares of Ares Capital in a report on Monday, May 4th. Zacks raised shares of Ares Capital from a “sell” rating to a “hold” rating in a report on Tuesday, July 14th. Morgan Stanley reissued an “equal weight” rating on shares of Ares Capital in a research report on Saturday, June 6th. BMO Capital Markets assumed coverage on shares of Ares Capital in a research report on Wednesday, July 1st. They set a “hold” rating and a $17.50 price target for the company. Finally, Cantor Fitzgerald initiated coverage on shares of Ares Capital in a research report on Tuesday, June 30th. They issued a “hold” rating and a $17.50 price objective for the company. Six analysts have rated the stock with a hold rating and six have assigned a buy rating to the company. Ares Capital currently has a consensus rating of “Buy” and an average target price of $17.81.
    Aug 28, 2015. 11:51 AM | 1 Like Like |Link to Comment
  • Using Ares Capital Corporation Data To Illustrate BDC Complications [View article]
    Craps16 - Thanks for your response. I might be guilty of "not seeing the forest for the trees". BDCs have lots of trees (or details). I try to paint a picture tree by tree - one tree at a time. It is good to have someone posting a view of the forest. ARCC can be a beautiful 'forest' when purchased during one of its over-sized dips.
    Aug 27, 2015. 11:53 PM | 1 Like Like |Link to Comment
  • Franklin Square Investment Corp. Has An Earnings Jump, While Its Share Price Does Not [View article]
    Steve Rasher - You can call it 'insurance' - I can call it 'generating a Required Rate of Return' assessment. We are talking about the same thing. I might nitpick that investors pay for safety. With BDCs, safety is a 'pay me now or pay me latter' condition. Unsafe BDCs have a long record of cutting dividends. One will eventually pay for a lack of safety.

    At the same time, there are obstacles to the correct perception of the safety attribute in any given BDC. (1) On the key issue of dividend coverage, FSIC has very good 'insurance' - as long as FSIC does not 'special dividend' the coverage away. (2) On the issue of debt/EBITDA, FSIC gets good marks for disclosure - but the ratio is growing (growing is bad). (3) I am slightly uncomfortable with the lack of consistency in NII/quarter. (4) I am not comfortable with the 50/50 mix of quarters with portfolio gains compared to quarters with portfolio losses.

    Thus the relatively tangible concept of insurance (or giving up x amount of yield for y amount of security) morphs into a 'nebulous measurement' of 'multiple attributes' that causes that extra security. This can lead to a state where "the more you know - the less certain you become about anything". I want to live in the polar opposite state. Each BDC appears to come with different obstacles to arriving in 'the right state'.

    This can lead to the conslusion that BDCs are like tic-tac-toe -- "the only way to win is to NOT play the game". That conclusion is in error because other income producing options come with their own set of problems.

    Steve - thanks for your response -- and sorry that I went off on an unrelated tangent.
    Aug 25, 2015. 09:59 PM | 1 Like Like |Link to Comment
  • Franklin Square Investment Corp. Has An Earnings Jump, While Its Share Price Does Not [View article]
    (1) Caesar's group of loans of $134 million (the current fair value from the 10-Q) out of a portfolio of $4.007 billion - that is 3.3% of the portfolio where the number of portfolio companies is 110. (2) Energy is 12% of portfolio holdings. (3) Five out of the last ten quarter's had negative portfolio changes (or negative "realized and unrealized" changes).

    Those are not allocation decisions / performance metrics that would cause me to question the quality of management - but they were sub-optimal performance or sub-optimal decisions. Most BDCs who have made decisions of that quality sell at discounts to NAV.

    On the other hand, LTM dividend coverage is great when you weed out the special dividends paid in Q3 and Q4 or last year. I love dividend coverage. But I wish we had more history so we can have a track record that says these guys will not 'special dividend' their way to a falling NAV.

    The weighted average yield of the portfolio is falling (slightly) - and that correlates to falling NII/share numbers going forward. Add that factor to the worry list.

    The 'portfolio company' leverage is significantly climbing. When portfolio quality falls, non-accruals tend to increase. ARCC reports 'portfolio company' EBITDA growth - FSIC does not. I can feel better about the same kind of rise in portfolio company leverage (at ARCC) when I know ARCC's portfolio company EBITDA growth (which ARCC discloses - FSIC does not). Add that to the worry list.

    All of the above does not change my valuation assessment - even though the 'tone' of these remarks are more negative than the tone of the article. FSIC is a higher quality BDC. But it merits being watched closely due to a fairly large worry list.

    Zmarzz writes "I can't see that the company has made any significant blunders or done anything that would make me in any question the integrity or competence of the management team" - and I CURRENTLY agree with that. But that assessment is subject to rapid change that is data dependent.
    Aug 25, 2015. 10:58 AM | 1 Like Like |Link to Comment
  • BDC Stats 8/24/15 [View instapost]
    After close to 40 minutes of trading - the prices are already not that relevant of close to the current prices. Dang! I had visions of one more day of falling prices. I had a buy list ready today. I had hopes of buying well covered dividends at close to 10% yields. The prices in my article http://seekingalpha.co... are from 8-21-15 -- and the yields in that spreadsheet are probably closer to the current yields.
    Aug 25, 2015. 10:11 AM | 1 Like Like |Link to Comment
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