Neil Feinberg

Long/short equity
Neil Feinberg
Long/short equity
Contributor since: 2011
Company: Nebo Management
so according to your thinking - stock should be up today???
did you write this before the $100MM revenue miss..
Why are they over-producing when pricing is so bad???
No offense but your comments lead me to believe you dont know the company that well... HGT prices off Texas Pandhandle, not Henry Hub and they can differ quite a bit.. Also, INTRA_MONTH moves in nat gas are meaningless, the company contracts usually in the first week of the month.. Finally, litigation costs could be well over 30mm if it goes against them, and WILL result in a dividend suspension, which will have a far more dramatic effect than you can imagine
I am long the name via options but using your article today to get thank you in advance!!!!!
wish you were right on distributions.. If case goes completely against them, they are on the hook for about 30mm (will have to pay legal fees and catch up on production for the past year) which would mean NO DIVIDENDS for about a year. Even though this is a retail name, any dividend funds would be forced to sell, and individuals holding for yield will swap out into other paying names. At $7.50, the risk /reward is is not favorable unless you feel strongly about positive arbitration (you would get an extra 10 cents in dividends) and a cold winter
when you look at projected weather - norms compared to forecast, what specific areas are you looking at. For example, the fact the South Dakota might have record lows wont affect gas prices whereas a few degrees above normal in NY or Chicago could have a big effect
Thanks for the explanation James
From everything you said above and from what else i have read - the 4th qtr distribution might be quite good. Shipping (and thus royalties) should be up compared to q42011 and realized price has to be higher
I think a dividend of 70 cents or higher would get the stock back to $27 in short order - any guesses on the payout? Does your analysis assume that even with the CLF shutdown - MSB still ships an equivalent amount in 2013 as 2012
how can you write any report on MSB without mentioning that CLF decided to temporarily close down 2 of MSB's mines and that might account for todays high yield
if they cannot mine they cannot ship and royalties will be lower - your analysis is flawed unless you can explain this
with that said - iron ore prices have increased over 40% in the past quarter - and CLF may reconsider - which would put MSB above $30
you should read their 10k - the value is about 8 or 9 dollars upon termination. also - i am guessing your returns above DONT account for the high cost of shorting these kinds of stocks - which in the case of GNI has been around 30% a year which essentially makes shorting this very tough
its actually a bit more dire than you think
You are assuming a $3.50 dividend stream, given the volatility in global steel prices - that is pretty optimistic
More important - you need to PRESENT VALUE the investment plus look at the tax consequences (dividends are taxed at ordinary rates - not the 15% qualified), so the real value today is
Hope everyone was able to make some good money on this MSB short - down from 30 to 26.75 in 2 days (yes, you need to adjust for the $1.13 dividend), so really 28.87 to 26.75 - still a very nice move
I do think we have more downside - if you want to stay short in the name and need protection - i would recommend buying the December 30 calls to hedge yourself in case of a pop - they are very cheap
MSB was a totally different company 4 years ago - the dividend study was done for the past 2 years since that is more applicable to what will likely happen this time
the only caveat i can add to this discussion is that some holders are lucky enough to get paid to loan out the shares - with the annual rate rising to as much as 30% when we are near the dividend record date. Most times - the cost to borrow is around 15% - which means holders (if they loan out their stock) would net 10% - which just about offsets the Present Value that the author mentioned.
I have noticed with this stock - as we get closer to the 2015 date, the value of the stock relative to its real value tends to decrease - last year the stock traded as much as 75% over its fair value - this year its been trading around 50% over its fair value. As the author has pointed out, the prices today are high - even relative to its ridiculous valuation - i would expect the stock to trade in the mid 60's within the next month
sorry - should have read KMP - not KMI
Ken - you are getting a high rate plus - my analysis is already assuming the dividends that need to be paid out. My rate is 15% - so the cost is $15 per year - and if the stock doesnt adjust by the dividend paid out - it just becomes an even better short since there is a Defined Terminal Value
this might be the most moronic analysis i have ever seen to Seeking alpha - and that includes all the Alfred Little articles
to be honest, i saw nothing in your article about why to be wary of this deal. What i see is a smart, somewhat opportunistic investor, trying to buy a good long term holding at a fair price (based on current market conditions)..It doesnt matter what Ichan bought FOR shares for, what matters is, where can he invest the cash..Do you think shareholders of Merrill complained at $27 per share, by saying the stock was trading at $40+ just a few months before that..
more importantly, where does FOR go if the bid is dropped. and what are the chances of them NOT accepting the bid. From what i can see, risk seems to be about $1-2 in the stock, with upside of $4.50, so if the odds are better than 33% of the deal happening, then you want to BUY it right here