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I seek to liberate investors from the chains of borrowed opinions by teaching metric awareness that leads to the formation of your own opinions. I am a retail investor that gathers, processes and analyzes significantly more data than average. I share that data in my articles. I let the data do... More
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  • YTD - There Are No Average Midstream MLPs

    The headline was hyperbole. Of my current coverage universe of 37 midstream MLPs - there was one with a year to date return near average. My universe's average was a 4.77% total return - or in the mid single digit returns. If one called mid single digit returns a return of 4%, 5% or 6% - then MPLX with a 6.32% total return would qualify. The data:

    MLP Midstream 4-30-15

    The consensus DCF (Distributable Cash Flow) projections were last updated on 3-31-15. The CAGR (the distribution Compound Annual Growth Rate) projections were updated 3-31-15. Yields are based on the Q2-15 distribution. Under the 'year to date' header, the change in the distribution is the change since Q2-14 - or the change over the last twelve months. The change in the target, EPS and DCF is the percentage change in the consensus 2015 projection that has happened since the beginning of 2015. The Dist/DCF number is the ratio of the Q2-15 distribution to the 2015 DCF projection. The 2015 DCF projection is an adjusted average of eleven DCF projections from the major brokerages covering MLPs. The CAGR is the percentage change in my CAGR projection since the beginning of the year. The target prices and EPS projections are from Yahoo Finance. When ACMP and WPZ merged, it was ACMP that purchased WPZ - and then renamed WPZ. WPZ paid a distribution of $0.9045 in Q2-14 compared to the current $0.8500. I show distribution growth because I use the official stats that compare the current distribution to ACMP's Q2-14 distribution of $0.5750.


    Company CurrentDistrib/Q2 DistDist/dcfDist/dcfYear-to-Date Percent Change
      PriceQuarterYield20152016PricePr+DistEPSTargetDCFDist*cagr

    American Midstream Partners, LP(NYSE:AMID)18.730.472510.0998.9588.73-4.97-2.57-38.27-31.61-12.392.160.00
    Blueknight Energy Partners, L.P.(NASDAQ:BKEP)8.350.13656.5460.6759.3525.5627.6235.714.4734.335.000.00
    Buckeye Partners, L.P.(NYSE:BPL)81.581.13955.5994.3783.637.829.33-6.60-1.39-1.833.590.00
    Boardwalk Pipeline Partners, LP(NYSE:BWP)17.510.10002.2822.7322.10-1.46-0.90-7.770.00-1.120.000.00
    Crestwood Midstream Partners LP(NYSE:CMLP)15.870.410010.3399.3994.254.557.25-89.80-23.31-6.780.00-60.00
    DCP Midstream Partners LP(NYSE:DPM)40.800.78007.6589.9187.15-10.19-8.47-5.02-19.202.064.70-11.11
    Enable Midstream Partners(NYSE:ENBL)16.750.31257.4691.2488.65-13.62-12.00-20.16-22.71-13.8427.03-40.00
    Enbridge Energy Partners, L.P.(NYSE:EEP)37.140.57006.14106.0593.83-6.92-5.49-29.931.19-2.714.880.00
    EnLink Midstream Partners, LP(NYSE:ENLK)25.730.38005.9191.5776.77-11.31-10.00-34.07-2.87-10.755.560.00
    Enterprise Products Partners L.P.(NYSE:EPD)34.250.37504.3873.1768.49-5.18-4.14-14.91-4.54-5.965.63-10.77
    Energy Transfer Partners, L.P.(NYSE:ETP)57.781.01507.0378.8380.24-11.11-9.55-11.78-4.936.198.5615.38
    EQT Midstream Partners, LP(NYSE:EQM)88.200.61002.7757.6851.370.230.925.452.14-0.9424.490.00
    Exterran Partners, L.P.(NASDAQ:EXLP)26.730.56258.4287.5585.8823.6426.24-23.88-11.71-1.154.650.00
    Genesis Energy LP(NYSE:GEL)49.710.59504.7980.4176.2817.1918.59-12.17-3.56-2.318.180.00
    Holly Energy Partners L.P.(NYSE:HEP)32.950.53756.5391.1083.9810.1611.960.00-1.16-1.265.91-10.00
    Kinder Morgan, Inc(NYSE:KMI)42.950.48004.4785.3379.011.512.65-29.062.1010.8414.2911.76
    Midcoast Energy Partners, L.P.(NYSE:MEP)13.730.34259.9887.8283.030.372.8717.39-3.86-3.119.4210.00
    Martin Midstream Partners LP(NASDAQ:MMLP)37.100.81258.7684.8691.0438.0241.04-32.77-10.67-0.263.1720.00
    Magellan Midstream Partners LP(NYSE:MMP)83.500.71753.4476.1368.171.021.88-9.17-0.08-3.3317.140.00
    MPLX or Marathon LP(NYSE:MPLX)77.750.41002.1166.4059.425.806.355.5810.8320.4925.190.00
    MarkWest Energy Partners, L.P.(NYSE:MWE)67.460.91005.4095.2980.710.401.76-52.573.90-8.834.605.00
    Targa Resources Partners LP(NYSE:NGLS)45.440.82007.2278.2867.63-5.10-3.38-63.73-21.89-8.327.540.00
    NuStar Energy L.P.(NYSE:NS)67.181.09506.5296.0589.3916.3318.2327.895.87-0.220.0036.36
    Oneok Partners, L.P.(NYSE:OKS)41.950.79007.53100.3287.785.857.85-24.24-18.58-5.126.040.00
    Plains All American Pipeline, L.P.(NYSE:PAA)50.110.68505.4791.0382.53-2.36-1.02-14.72-4.95-1.638.730.00
    Phillips 66 Partners L.P.(NYSE:PSXP)75.850.37001.9568.8454.8110.0410.58-20.756.48-2.2735.040.00
    Regency Energy Partners LP(NYSE:RGP)23.470.50208.5695.6288.46-2.21-0.12-12.00-11.62-2.334.580.00
    Spectra Energy Partners, LP(NYSE:SEP)54.180.58874.3583.2183.21-4.90-3.865.732.57-0.355.820.00
    Sunoco Logistics Partners L.P.(NYSE:SXL)44.360.41903.7867.8563.736.187.184.62-4.980.8220.582.22
    TC PipeLines, LP(NYSE:TCP)68.080.84004.9483.1774.67-4.41-3.231.89-0.15-1.943.700.00
    Tesoro Logistics LP(NYSE:TLLP)56.030.69504.9672.4068.81-4.79-3.615.53-2.948.7817.800.00
    Transmontaigne Partners L.P.(NYSE:TLP)37.710.66507.0575.1473.6819.6821.79-16.06-6.334.120.760.00
    Valero Energy Partners LP(NYSE:VLP)50.580.27702.1955.9643.9719.9120.5731.0115.9616.4730.050.00
    Western Gas Partners LP(NYSE:WES)72.890.72503.9884.8071.25-0.220.77-19.67-1.05-4.4716.000.00
    Western Refining Logistics(NYSE:WNRL)30.960.33304.3069.7454.371.512.60-0.620.69-2.0511.740.00
    Williams Partners L.P.(NYSE:WPZ)49.400.85006.88100.5982.32-8.86-7.29-68.206.63-11.7556.86-27.78

    Pipeline Average  5.8381.7374.693.284.79-14.36-4.206.1411.37 
    Shipping
    Golar LNG Partners LP(NASDAQ:GMLP)29.210.57707.90114.8385.48-6.23-4.38-1.10-1.20-25.5610.33-26.67
    Navios Maritime Partners L.P.(NYSE:NMM)13.020.442513.5997.7990.7728.0232.37-16.67-17.06-1.090.000.00
    Teekay LNG Partners LP.(NYSE:TGP)39.420.70007.1089.4684.85-8.33-6.703.72-4.71-3.101.19-33.33
    Teekay Offshore Partners LP.(NYSE:TOO)23.460.53849.1884.1378.60-12.43-10.42-5.49-37.237.110.07-12.50

    Shipping Average  9.4495.85 0.262.72-4.88-15.05  

    MidStream Average 6.3592.4684.123.064.70-13.76-5.42  

    The (price change only) Alerian MLP index [the ^AMZ - which includes other MLP sectors] is -1.47% year to date.
    The Alerian MLP index ETN AMJ is -1.20% and with dividends is 0.08%.
    The S&P500 index ETF SPY is 1.42% and with dividends is 1.87%.
    The Russell 2000 index ETF IWM is 1.30% and with dividend is 1.62%.
    With the 10yr Treasury @ 2.03% & the sector average yield [on Q1 distrib's] at 6.35% - the spread is 432 bps.
    With the JNK yielding 5.69% - spread to the Lehman U.S. High Yield Index is 66 bps.
    With the HYG yielding 5.12% - the spread to the iBOXX High Yield Index is 123 bps.

    So . . . . . while there is only one 'average' MLP - the statement that "The average midstream MLP is beating the return of the S&P 500 so far in 2015" does not have much meaning. Right? I'm not sure. Things have been so bad for so long with anything close to energy investing, that I am willing to celebrate even the less meaningful news. So . . . hip hip hooray for MLPs.

    May 01 1:45 PM | Link | Comment!
  • Analysts 'Echo' Management

    Where do EPS projections come from? The simple answer is that they come from analysts - and I will tell you that the simple answer is simply wrong. EPS projections come from management - and the analysts echo that guidance. Want some evidence?

    I will provide some evidence that has not happened yet - and revisit the stats at the beginning of next month. The evidence comes from AmerisourceBergen Corporation (NYSE:ABC) and the projections from Yahoo Finance.

    Here is the data from 5-01-15:

    Earnings EstCurrent Qtr.
    Jun 15
    Next Qtr.
    Sep 15
    Current Year
    Sep 15
    Next Year
    Sep 16
    Avg. Estimate1.131.184.625.31
    No. of Analysts14.0014.0017.0017.00
    Low Estimate1.101.084.524.46
    High Estimate1.171.254.745.61
    Year Ago EPS1.011.103.974.62

    And here is the new guidance from the 4-30-15 ABC earnings release:

    Fiscal Year 2015 Expectations

    Our updated expectations for financial performance in fiscal 2015, including the impact of the MWI transaction, are as follows:

    • Adjusted diluted earnings per share from continuing operations in the range of $4.85 to $4.95, a 22 percent to 25 percent increase over fiscal 2014, and an increase over prior guidance of $4.53 to $4.63;

    Note that the current EPS projection is "copied" from the prior guidance of "$4.53 to $4.63". It is my expectation (an expectation that approaches "certainty") that the EPS projection will rise towards $4.93 as May goes forward. Yahoo will provide stats that will assist you in tracking this.

    EPS TrendsCurrent Qtr.
    Jun 15
    Next Qtr.
    Sep 15
    Current Year
    Sep 15
    Next Year
    Sep 16
    Current Estimate1.131.184.625.31
    7 Days Ago1.131.184.625.25
    30 Days Ago1.131.184.625.25
    60 Days Ago1.081.174.575.11
    90 Days Ago1.101.174.575.15

    Why does this matter to you?

    Let's look at the 2014 stats from the Health Care sector on total returns and intra-year EPS projection changes:

    The Importance of Intra-Year EPS Projections - excluding non-domestic companies The following companies had 2014 EPS projections that increased over 2% since the beginning of the year: ABBV, ABC, ABT, AGN, AMGN, BCR, CAH, COV, JNJ and TMO. Their mean price gain for the year is 32.27%. Their mean total return for the year is 33.81% - and 6 of the 10 beat the sector median yearly price gain. Their mean RRR ("Required Rate of Return" or risk assessment - where lower is good and higher is bad) is 9.69%.
    The following companies had 2014 EPS projections that increased or decreased less than 2% since the beginning of the year: A, BDX, BMY, DGX, LLY, MCK, MDT, MRK, PFE, STJ and SYK. Their mean price gain for the year is 18.12%. Their mean total return for the year is 20.29% - and 6 of the 11 beat the sector median yearly price gain. Their mean RRR is 9.38%.
    The following companies had 2014 EPS projections that fell over 2% since the beginning of the year: AZN, BAX, PRGO, ZMH and ZTS. Their mean price gain for the year is 17.24%. Their mean total return for the year is 19.12% - and 2 of the 5 beat the sector median yearly price gain. Their mean RRR is 9.70%. Only 5 of the 32 had projection changes over 10%. Only 11 of the 32 had projection changes over 5%. Non-domestics were excluded because currency effects may have caused low RRR non-domestics to have significant EPS declines. I could be two years away from having enough EPS accuracy data to produce meaningful RRRs.

    Companies with rising EPS projections out perform companies with falling projections. This is logical. There is evidence of this in sector after sector - year after year.

    Summary - I am not writing this to say that ABC is currently a buy because the price appreciation has already been great in 2015. (In theory - a rising EPS projection results in ABC selling at a lower "price-implied CAGR" based on its P/E ratio. The price of ABC should rise until the "price implied CAGR" is back in alignment with the forward "CAGR projection".) I am only writing this to provide evidence of "where" EPS projection come. Once one grasps the source of the projections, one can begin to see that errors in projections are mostly (or close to 90%) caused by errors in management projections - and not errors in the forecasts of analysts. And this realization turns a stats like "historical EPS projection accuracy" (a stat I use in setting RRR assessments) from "something weird that I cooked up" into something logical.

    Put in difference words - retail investors need the tools to assist them in making risk or RRR assessments. One of those tools is "historical EPS projection accuracy". Investors will need to acclimate to the perception that EPS projections come from management. I would hope that the morphing in the ABC projection over the next few weeks will provide evidence for that perception.

    For many of you - this is trivial stuff. For those who want evidence that RRRs matter - this stuff (the upcoming ABC morph) matters.

    Almost all publicly traded companies provide some form of guidance. The guidance provided by ABC was done in a form that us simple retail investors can understand. The ABC guidance also including wording like "revenue growth in the range of 12% to 13%" and "adjusted operating margin increase of 8 to 10 bps". I view such numbers as the details that get one to a $4.85 to $4.95 EPS projection. In many cases, even my "eyes glaze over" when this kind of talk is going on. I suspect that many investors fail to perceive that management has been instructing the analysts for years -- right before their glazed over eyes.

    Tags: ABC
    May 01 1:36 PM | Link | 1 Comment
  • PFLT To Buy MCGC

    The news - PennantPark Floating Rate Capital Ltd. (NASDAQ:PFLT) and MCG Capital Corporation (NASDAQ:MCGC) announced today that they have entered into a definitive agreement under which PFLT will acquire MCGC in a stock and cash transaction currently valued at approximately $175 million, or approximately $4.75 per MCGC share (an amount equal to Q1-15 NAV - MCGC reported Q1 today) at closing, representing a 15.8% premium to MCGC's closing stock price on April 28, 2015.

    Under the terms of the transaction, MCGC stockholders will receive $4.521 in PFLT shares for each MCGC share, resulting in approximately 11.8 million PFLT shares expected to be issued in exchange for the approximately 36.9 million MCGC shares expected to be outstanding at closing. Additionally, each MCGC shareholder will receive $0.226 per share in cash from PennantPark Investment Advisers, LLC. To the extent PFLT's 10-day volume-weighted average price is less than PFLT's NAV, the Adviser will pay up to an additional $0.25 per PFLT share issued in this transaction. Following the transaction, PFLT stockholders are expected to own approximately 56% of the combined company and MCGC stockholders will own approximately 44%.

    Yahoo numbers - PFLT's Market Cap this morning - $210.66 million

    MCGC market cap this morning - $166.09 million

    Using the price paid for MCGC - combined market cap = 175 + 210 = 385

    PFLT's 210/385 = 54.54%

    For Q1-15 MCGC reported "had no loans on non-accrual, at cost or fair value, and reported leverage for each loan is less than 4.0x",

    The book value of total investment was $50.134 million while their cost was $208,129 million - which looks like a bargain, until you take into account that this is stuff from MCGC. To compared - PFLT ended Q4-14 with $343 in investments. (Most of MCGC's assets were in cash - $116 million.)

    Combined portfolio = $393 million. And the percentages would be 87% of PFLT's investments - 12.7% of MCGC's investments.

    Those MCGC investments generated $1.507 of income.

    Doing the math: 1.507 time 4 (to annualized the income) = 6.028

    6.028/50.134 (to get the yield) = 12.02% (which is not bad for a zero non-accrual portfolio that is very 'marked down')

    MCGC closed yesterday at $4.10. As I write this, MCGC is trading at $4.46.

    PFLT closed yesterday at $14.15. As I write this, MCGC is trading at $14.13.

    Tags: PFLT
    Apr 29 12:08 PM | Link | 1 Comment
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