Howard Reisman

Howard Reisman
Contributor since: 2012
Company: Stock Rover
I find it amazing that there is no mention of the concerns with 777 demand (a very profitable plane for Boeing) and no counterpoint in the article as to why the current price may be actually justified (dramatically lower earnings forecast, weakening global demand, soft orders etc. etc.). This article definitely lacks balance.
The google numbers used in this analysis are GAAP
I am not necessarily a "believer". I wanted to look at the historical data and see if there were any patterns that had a probability of repeating that were well north of 50%. And it seems there are a few.
Rotation is not painful, it is identical to the notion of rebalancing periodically - meaning adjusting your portfolio to get to a more ideal allocation. Note I am not advocating totally dumping one sector or piling into another, I am advocating considering minor changes in your market exposure and sector weights based on the season.
Regarding trading, we are talking twice a year, I would not classify that as anywhere near frequent.
Regarding your strategy, it is a sound strategy and given that, it sounds like sector adjustment is not for you. Different investors run different strategies, it is what makes markets.
Thanks for letting me know. I appreciate the good word and the feedback.
I like the company, but they are obviously tied to the price of gold, which hasn't been healthy lately, so neither has the stock.
If you are a gold bull, you should like the stock. If you do not think the price of gold will do well in the future, then there is no reason to hold the stock.
Point #1 - who knows - no one can reliably predict the future.
Point #2 - You seem to want to extend screeners beyond their intent. Their intent is to provide a list of candidates for consideration. Period. If you don't like the list, because the criteria isn't criteria you care about, that's fine. Every investor has their own style. That's what makes a market.
Target didn't qualify because compounded sales growth over 5 years is 2.9%
McDonald's didn't qualify because it has has a payout ratio of 53% and compounded sales growth over 5 years of 3.6%
Walgreens didn't qualify because its compounded EPS growth over 5 years is 1.2%
Apple didn't qualify because it doesn't have a 5 year track record with dividends
The point of screens is to search for stocks beyond your own personal favorites
I wasn't looking to do a back test. I was looking to find companies that have exhibited strong financial results and dividend history over the last 5 years.
A back test is designed to test a strategy by seeing what passed at the time and looking at performance forward. I was looking to find good companies that have executed well in the last 5 years under the assumption that it would be a good place to start the research process for companies that are likely to execute well in the next 5 years.
As stated in the last paragraph, the goal of the article is to find potentially interesting companies to research if the criteria I used to screen is something that resonates for an investor.
I am testing for stocks that have met the screening criteria as defined based on 5 year operational performance and dividend history. The pass the criteria now which means they have established the operational and dividend track record over the last five years to qualify. That was what I was looking for.
Yes the criteria applied was based on current metrics. There was no attempt to go back to the starting point and remove dividend and earnings survivor bias.
Glad you enjoyed the article
I actually like EEP going forward. I have not been a fan until recently because of weak growth and poor distribution coverage, but that all seems to be improving. Their growth profile with new capital projects is much better than it has been. However they will probably go to the equity markets at some point in the future for capital. If/when that happens, it is usually a bad week for the stock.
It is true that for buy and hold, the importance of liquidity is diminished. And the importance of liquidity to an investor will vary directly with the size of the commitment an investor is making towards an MLP.
For me, I like the feeling that if I want to get out (for any reason), I can get out without getting killed. I am sure many other investors will value that less than I do.
HEP may be an excellent MLP, but they fail the liquidity test for me. Their trading volumes are well under the lowest of the top 20 MLP's by size. Specifically WES is #20 at around 200K shares per day, HEP is less than a fourth of that at around 45K per day
I used to love EPB, right up until they were bought by Kinder Morgan. That destroyed a lot of capital for EPB investors, me included. Now they are one of two MLPs owned by Kinder Morgan (KMP being the other). So concern about unfavorable treatment by the GP relative to KMP. Or in other words, for me, they didn't get past the first criteria.
My MLP's are held in taxable accounts only. I have not personally investigated whether holding them in a Roth IRA makes sense or not. There is an article in Seeking Alpha on it that may shed some light on the topic for you
I left out GP's on purpose because of the high variability of the distribution stream relative to limited partners. GP's is a whole other topic. They also are more likely to fail the liquidity test.
Regarding WES. The 11.1% is calculated based on the current distribution annualized vs. the preceding 4 quarters. So $.50 is the current distribution ($2.00) annualized. The preceding 4 quarters were ($.48, $.46, $.44 and $.42) or $1.80. Which works out to 11.1%. Now in the case of WES, they have been raising every quarter, which is unusual for a MLP. So $2.00 is probably low, presuming they raise beyond $.50 in the next three quarters.
Regarding EPD, the numbers I have are as follows (distribution and coverage estimates going forward). So if anything, 1.4x is conservative based on analyst estimates.
2012 E - $2.53 and 1.42x
2013 E - $2.70 and 1.40x
2014 E - $2.90 and 1.47x
Tax selling and hedge fund selling are the two reasons I have seen to explain the decline.
I do. I like KMP, but their distribution coverage was lower than the other MLPs on the list. I do think they will show good distribution growth in the future, as they also have a lot of capital projects slated. However they will be financing that with a major equity offering.
Regarding NGLS, I think their assets are well positioned for strong future growth being in areas where there will high future drilling activity. What I don't like about NGLS is they have more sensitivity to commodity prices (natural gas) than most MLPs do.
I did not explicitly consider diversification. However all of the MLPs are relatively large and own a variety of assets. Regarding MWE, they have the Arkoma pipeline and the Hobbs NM gas pipelines.
Regarding WES, they seem to think they have a pipeline. From their website --> We provide the following services:
Operating Areas
East Texas
West Texas
Rocky Mountains
Current Assets / Investments
15 natural gas gathering systems
7 natural gas treating facilities
10 gas processing facilities
1 natural gas pipeline
2 NGL pipeline
1 crude pipeline
10,810 miles of pipeline
125 compressor stations
500,882 horsepower of compression
You would have a $10 short term capital gain coupled with a $2 distribution, all of which would effectively be treated and taxed as ordinary income (because of recapture).
The tax you would pay on these amounts would depend on your prevailing tax rates.
Well the whole point is you do want to own the stock, just at a better price than today's price. The idea is rather than buying the stock, you sell the put to either buy cheaper or get paid not to buy
As I said in an earlier post, I don't use MLPs in my IRA so I haven't had to face (or learn about) any of the associated tax issues. I think this post on Seeking Alpha covers the issue in quite a bit of depth. Here is the URL
I don't use my IRA for MLPs so I am not knowledgeable on the tax issues specific to an IRA.
Again I don't know if things are treated differently in an IRA, but for a normal account my understanding is recapture and LT cap losses are different animals and cannot offset. I would be surprised if they could offset in an IRA. Perhaps someone else can expound further.
I think whenever you considering things based on trusts and will, its best to get professional advice. Unfortunately I don't have any idea as it is well outside of my area of expertise.
I am familiar with WPZ, not familiar with RNF. I'll have some comments on specific MLPs next week
If you do that with no distribution received, my understanding is it is just like any other short term stock trade. If anyone else on the forum understands differently, please update.
I think this is pretty right. Holding for 7 years, you would receive (7 x $600) or $4200 in distributions, less the $1549 recapture tax less the (7 x $39.06 ordinary income tax) = net gain of $2378. Dividing over 7 years (ignoring the payment timings and time value of money) that is around $340 per year net or 3.4%
The second part is also correct, the $1000 appreciation on the stock price would be taxed at whatever the prevailing LT capital gain tax rate is for the investor
Yes, there is a mistake in the data. It was pulling from the cash flow rather than the actual distributions. I apologize for that. Next week, I will publish an updated table with corrected values with the second article
I am sorry I can't be of help as I do not invest or follow the ETFs. When I invest in MLPs, I buy the companies directly and deal with the K-1's (or I should say, I let my accountant deal with the K-1's)
The graphs are similar. What is different is the values on the Y axis. The second graph shows significantly bigger numbers when you factor in distributions. For example in the first graph PAA (orange) is around 80% and in the second graph, around 150%
I do own a basket of MLPs. Though not currently the three I mentioned in the article. Next week I will post an article listing some that I like for the long term
As I said, I am not a tax lawyer. It was a guess as I stated. And a wrong one at that (assuming you are correct). Appreciate the update.