MLPs With Lower Leverage May Fare Better As Tapering Begins And Rates Rise [View article]
The potential flaw is that rates went from one level of "normal" to another level of "normal". Today we are talking about going from artificial non-market low rates to normal sometime in the future.
The rotation from bonds to equity or vis versa would have been different then versus forward.
hey, I can't guarantee anything, but would rather own a low leverage MLP vs a high leverage MLP, when rates re-normalize. ya pays yer money and takes yer chances
MLPs With Lower Leverage May Fare Better As Tapering Begins And Rates Rise [View article]
As for the "notoriously bad" comment, we are all rather stuck when it comes to computer screening. I have not found a single database that does not contain some data that is either bad or significantly in conflict with some data points in some other database. That's just the way it is with data vendors who try to capture everything about every security. To the extent that computer filtering eliminates stocks, they tend to be lost to the searcher unless unearthed by a different search or searching in a different database. To the extent that computer filtering suggests a security, then the deeper reading has to take place to corroborate the filter data, and then go to next levels of examination.
MLPs With Lower Leverage May Fare Better As Tapering Begins And Rates Rise [View article]
I am with you on all your comments. If I were to write about a specific MLP, I would certainly go into those sorts of detail and refinement, but this as you acknowledge is a broad brush survey of an industry, just to get people thinking, as you obviously have done it great detail.
MLPs With Lower Leverage May Fare Better As Tapering Begins And Rates Rise [View article]
What is the data source for the financial info in the table? The EV/EBITDA numbers look a little off to me; for example, PVR in the table is showing EV/EBITDA of 59.8x while I come up with EV/EBTIDA of 19.2x. I AGREE THE PVR DATA SEEMS WAY OFF. CHECKED OTHER DATABASES AND FOUND VAIOUS RATIOS -- TO AVOID ISSUES WITH THAT WHOE QUESTION I HAVE SUBMITTED A REPLACEMENT TABLE WITH EV/EBITDA RATIOS FROM S&P CAPITAL IQ AS RENDERED BY YAHOO FINANCE SO THAT ALL READERS HAVE ACCESS TO THE SAME SET OF NUMBERS. FOR PVR CAPITAL IQ RENDERS 14.84 AS OPPOSED TO THE "BAD" DATA POINT IN THE ORIGINAL TABLE AND THE 19.2 YOU DERIVED FROM YOUR CALCULATION OR DATABASE SOURCE. THAT REPLACEMENT TABLE WILL BE UP SHORTLY.
Is the EBITDA just Trailing Twelve Month EBITDA? I PRESUME BUT DO NOT KNOW THT CAPITAL IQ USES TRAILING 12 MONTH DATA Do you have a view about whether or not it would be better to look at EV / EBITDA using EBITDA less any GP Distributions? THAT WOULD BE AN INTERESTING NUMBER WHICH I DID NOT HAVE READILY AT HAND. NOTE THIS TABLE IS NOT MEANT TO BE A COMPLETE ANALYSIS. BIT JUST A SET OF PRELIMINARY INDICATORS TO SUGGEST WHERE MORE DIGGING COULD BE MOST USEFUL I'm assuming that the EV numbers in the table are just using the Market Cap of the LP Units (am I correct in assuming that though?). NO THEY USED THE STANDARD DEFINITION OF EV WHICH INCLUDES NET DEBT
Is there a reason you used Total Liabilities / Total Assets as the quick measure of leverage? COULD HAVE USED ONE OF SEVERAL RATIOS (LONG-TERM DEBT TO ASSETS, LONG-TERM DEBT TO CAPITAL, LONG-TERM DEBT TO EQUITY, TOTAL DEBT TO EQUITY, ETC -- JUST PICKED ONE THAT IS PROBABLY UNIVERSALLY UNDERSTOOD, AND AN INDICATOR -- OTHER RATIOS WOULD BE USEFUL TO EXAMINE ALSO. Does that tend to make an older more established pipeline MLP look "more levered" because it has been depreciating its assets for a longer period? YES, EXCEPT TO THE EXTENT THAT DEPRECIATION IS A REFLECTION OF REAL PHYSICAL DEPRECIATION THAT REQUIRES CAPITAL EXPENDITURE FOR MAINTENANCE IN GOOD WORKING ORDER. IN A FOUR COLUMN DATA TABLE, YOU CAN ONLY INCLUDE SO MUCH INFORMATION. THE POINT OF THIS ARTICLE IS SIMPLY TO GET PEOPLE THINKING ABOUT WHAT HAPPENS TO STOCKS THAT HAVE ATTRACTED A SIGNIFICANT FOLLOWING AMONG THOSE WHO WOUL OTHERWISE HAVE PURCHASED BONDS WHEN INTEREST RATES RISE, AND AMONG STOCKS THAT HAVE MORE RATHER THAN LESS DEBT. WITH RESPECT TO THE SECOND POINT, THAT IS WHAT I SAID THERE IS NOT DISTINCTION MADE IN THE TABLE AS TO THE TERM STRUCTURE OF DEBT OR WHETHER FIXED OR VARIABLE RATE. Also wouldn't that tend to favor MLPs that have grown more by acquisitions because that would lead to a comparatively higher number for Total Assets when compared to asset growth from organic growth projects? THIS ISSUE QUESTION WAS NOT ADDRESSED IN THE ARTCLE. WOULD HAVE TO MULL OVER THAT QUESTION
Would Total or Net Debt / EBITDA be a better measure of leverage and interest rate risk (i.e. a little more comparable across the universe of names regardless of how much they have depreciated their assets)? PERHAPS YES. I WOULD ENCOURAGE PEOPEL TO LOOK AT THAT TOO.
Is there some level of U.S. Treasury rates that would motivate you to move client money out of MLPs and into U.S. Treasuries? I WOULD BE MORE INCLINED TO BE GUIDED BY PRICE ACTION IN CONJUNCTION WITH OBSERVATION OF INTEREST RATES AS A POSSIBLE CAUSE FACTOR. If so what level is that and would that be the starting point for when it may be possible that "Securities that have served as yield alternatives to bonds for many investors will likely experience some negative price impact as interest rates rise"? If it is not an absolute number for U.S. Treasuries is there perhaps a spread between the 2 securities that would motivate you to make the move?
Could there be some pushback from clients that have a zero tax basis in their direct MLP positions? THAT IS A SPECIFIC SET OF CIRCUMSTANCES THAT WE DO NOT FACE AT THIS TIME AND ONE THAT IS TOO INDIVIDUALIZED IN NATURE TO ALLOW A GENERIC ANSWER. Would the possible tax leakage cause the needed U.S. Treasury rate to be even higher before that group of people start selling their MLPs (thereby partially delaying and/or dampening the impact of rising interest rates at least for those specific MLP positions)?
Do you have any historical data analysis to support the theory that "Those yield alternative securities with lower leverage may be less impacted than those with high leverage"? I HAVE NONE TO PRESENT, BUT IT IS MY BELIEF THAT IS TRUE, AND THAT BELIEF HAVE ALSO BE EXPRESSED BY MULTIPLE MAJOR INVESTMENT HOUSES THE PAST 6+ MONTHS. If you know of anything (even if not specific to MLPs) you could point me to or if there is a presentation with data analysis floating around on the web somewhere I'd love to get my hands on it. THE LOGIC IS SIM0LE ENOUGH. IF PEOPLE WHO WOULD NORMALLY BUY A BOND FOR LOW RISK AND INCOME, BUT WERE FORCED OUT OF BONDS DUE TO RATE SUPPRESSION AND INTO HIGHER VOLATILITY ASSETS TO OBTAIN YIELD, WOULD NOT AT LEAST NEW MONEY FLOWS FROM THAT GROUP DIVERT IN PART AT LEAST BACK TO BONDS WHEN RATES "NORMALIZE"? THE LARGER THE SHARE OF TOTAL RETURN FROM AN EQUITY THAT COMES FROM INCOME VERSUS PRICE APPRECIATION, THE MORE IT COMPETE WITH BONDS FOR MONEY FLOWS, AND THEREFORE HAS MORE MONEY FLOW RISK WHEN BOND RATES RISE. YOU COULD CERTAINLY TAKE SOME MLPS WITH LONG HISTORIES AND CALCULATE THEIR MONTHLY OR QUARTERLY HISTORICAL YIELD AND PLOT IT AS A RATIO OR SPREAD TO THE 10-YEAR TREASURY IF THE LOGIC IS NOT PERSUASIVE ENOUGH -- THEN YOU WOULD KNOW FOR SURE.
Bull Run Likely To Continue So Long As Low Quality Outperforms High Quality [View article]
I I stated throughout the article these are price ratios. This was not an article about total return. It was an article about relative price movements.
Bull Run Likely To Continue So Long As Low Quality Outperforms High Quality [View article]
I was referring to those investors who are in the equity side (that is why I called them "equity investors" -- you are correct that there is a huge group of "investors" who are on the sidelines
4 Companies With Extreme Price Charts And High Statistical Probability Of Decline [View article]
It's not a model, and we made no extrapolation, and said that other fundamentals should be evaluated -- that this is just a way to identify stocks that need a closer look -- so what it your point?
I understand the shoulds and should nots very well, but the database that publishes them chose to do so and it is data that many yield chasers observe -- the article has been modified to indicated yield to attempt to placate those of you who have had so much trouble with reporting widely distributed data, that is not incorrect, but merely less desirable -- can we finally drop this particular point and concentrate on the purpose of the article
Good point about faded memories -- and the lag time for investors adapting to the current situation from their recent experience and memory is a risk factor
The work is not sloppy. Your read is superficial. The yields reported we of 12-month trailing dividends, and were correct. The text said they were trailing. The charts showed the extraordinary dividends in 2012. You need to distinguish between your desire for the yield presented to have been "indicated" instead of "trailing". Sloppy reading is also a problem on SA.
You are absolutely correct. In 2009 there were over many, many high quality, high yield, consistent dividend growers (and long-term low volatility, but who would have believed int in 2008Q4 or 2009Q1).
Perhaps I should have said that the commenter was thinking in terms of out of date information. As of today, the pickings in the 4% realm are quite thin.
MLPs With Lower Leverage May Fare Better As Tapering Begins And Rates Rise [View article]
The rotation from bonds to equity or vis versa would have been different then versus forward.
hey, I can't guarantee anything, but would rather own a low leverage MLP vs a high leverage MLP, when rates re-normalize. ya pays yer money and takes yer chances
MLPs With Lower Leverage May Fare Better As Tapering Begins And Rates Rise [View article]
MLPs With Lower Leverage May Fare Better As Tapering Begins And Rates Rise [View article]
MLPs With Lower Leverage May Fare Better As Tapering Begins And Rates Rise [View article]
Is the EBITDA just Trailing Twelve Month EBITDA? I PRESUME BUT DO NOT KNOW THT CAPITAL IQ USES TRAILING 12 MONTH DATA Do you have a view about whether or not it would be better to look at EV / EBITDA using EBITDA less any GP Distributions? THAT WOULD BE AN INTERESTING NUMBER WHICH I DID NOT HAVE READILY AT HAND. NOTE THIS TABLE IS NOT MEANT TO BE A COMPLETE ANALYSIS. BIT JUST A SET OF PRELIMINARY INDICATORS TO SUGGEST WHERE MORE DIGGING COULD BE MOST USEFUL I'm assuming that the EV numbers in the table are just using the Market Cap of the LP Units (am I correct in assuming that though?). NO THEY USED THE STANDARD DEFINITION OF EV WHICH INCLUDES NET DEBT
Is there a reason you used Total Liabilities / Total Assets as the quick measure of leverage? COULD HAVE USED ONE OF SEVERAL RATIOS (LONG-TERM DEBT TO ASSETS, LONG-TERM DEBT TO CAPITAL, LONG-TERM DEBT TO EQUITY, TOTAL DEBT TO EQUITY, ETC -- JUST PICKED ONE THAT IS PROBABLY UNIVERSALLY UNDERSTOOD, AND AN INDICATOR -- OTHER RATIOS WOULD BE USEFUL TO EXAMINE ALSO. Does that tend to make an older more established pipeline MLP look "more levered" because it has been depreciating its assets for a longer period? YES, EXCEPT TO THE EXTENT THAT DEPRECIATION IS A REFLECTION OF REAL PHYSICAL DEPRECIATION THAT REQUIRES CAPITAL EXPENDITURE FOR MAINTENANCE IN GOOD WORKING ORDER. IN A FOUR COLUMN DATA TABLE, YOU CAN ONLY INCLUDE SO MUCH INFORMATION. THE POINT OF THIS ARTICLE IS SIMPLY TO GET PEOPLE THINKING ABOUT WHAT HAPPENS TO STOCKS THAT HAVE ATTRACTED A SIGNIFICANT FOLLOWING AMONG THOSE WHO WOUL OTHERWISE HAVE PURCHASED BONDS WHEN INTEREST RATES RISE, AND AMONG STOCKS THAT HAVE MORE RATHER THAN LESS DEBT. WITH RESPECT TO THE SECOND POINT, THAT IS WHAT I SAID THERE IS NOT DISTINCTION MADE IN THE TABLE AS TO THE TERM STRUCTURE OF DEBT OR WHETHER FIXED OR VARIABLE RATE. Also wouldn't that tend to favor MLPs that have grown more by acquisitions because that would lead to a comparatively higher number for Total Assets when compared to asset growth from organic growth projects? THIS ISSUE QUESTION WAS NOT ADDRESSED IN THE ARTCLE. WOULD HAVE TO MULL OVER THAT QUESTION
Would Total or Net Debt / EBITDA be a better measure of leverage and interest rate risk (i.e. a little more comparable across the universe of names regardless of how much they have depreciated their assets)? PERHAPS YES. I WOULD ENCOURAGE PEOPEL TO LOOK AT THAT TOO.
Is there some level of U.S. Treasury rates that would motivate you to move client money out of MLPs and into U.S. Treasuries? I WOULD BE MORE INCLINED TO BE GUIDED BY PRICE ACTION IN CONJUNCTION WITH OBSERVATION OF INTEREST RATES AS A POSSIBLE CAUSE FACTOR. If so what level is that and would that be the starting point for when it may be possible that "Securities that have served as yield alternatives to bonds for many investors will likely experience some negative price impact as interest rates rise"? If it is not an absolute number for U.S. Treasuries is there perhaps a spread between the 2 securities that would motivate you to make the move?
Could there be some pushback from clients that have a zero tax basis in their direct MLP positions? THAT IS A SPECIFIC SET OF CIRCUMSTANCES THAT WE DO NOT FACE AT THIS TIME AND ONE THAT IS TOO INDIVIDUALIZED IN NATURE TO ALLOW A GENERIC ANSWER. Would the possible tax leakage cause the needed U.S. Treasury rate to be even higher before that group of people start selling their MLPs (thereby partially delaying and/or dampening the impact of rising interest rates at least for those specific MLP positions)?
Do you have any historical data analysis to support the theory that "Those yield alternative securities with lower leverage may be less impacted than those with high leverage"? I HAVE NONE TO PRESENT, BUT IT IS MY BELIEF THAT IS TRUE, AND THAT BELIEF HAVE ALSO BE EXPRESSED BY MULTIPLE MAJOR INVESTMENT HOUSES THE PAST 6+ MONTHS. If you know of anything (even if not specific to MLPs) you could point me to or if there is a presentation with data analysis floating around on the web somewhere I'd love to get my hands on it. THE LOGIC IS SIM0LE ENOUGH. IF PEOPLE WHO WOULD NORMALLY BUY A BOND FOR LOW RISK AND INCOME, BUT WERE FORCED OUT OF BONDS DUE TO RATE SUPPRESSION AND INTO HIGHER VOLATILITY ASSETS TO OBTAIN YIELD, WOULD NOT AT LEAST NEW MONEY FLOWS FROM THAT GROUP DIVERT IN PART AT LEAST BACK TO BONDS WHEN RATES "NORMALIZE"? THE LARGER THE SHARE OF TOTAL RETURN FROM AN EQUITY THAT COMES FROM INCOME VERSUS PRICE APPRECIATION, THE MORE IT COMPETE WITH BONDS FOR MONEY FLOWS, AND THEREFORE HAS MORE MONEY FLOW RISK WHEN BOND RATES RISE. YOU COULD CERTAINLY TAKE SOME MLPS WITH LONG HISTORIES AND CALCULATE THEIR MONTHLY OR QUARTERLY HISTORICAL YIELD AND PLOT IT AS A RATIO OR SPREAD TO THE 10-YEAR TREASURY IF THE LOGIC IS NOT PERSUASIVE ENOUGH -- THEN YOU WOULD KNOW FOR SURE.
Bull Run Likely To Continue So Long As Low Quality Outperforms High Quality [View article]
Bull Run Likely To Continue So Long As Low Quality Outperforms High Quality [View article]
4 Companies With Extreme Price Charts And High Statistical Probability Of Decline [View article]
4 Companies With Extreme Price Charts And High Statistical Probability Of Decline [View article]
5 Highest Yielding, High Quality, Low Volatility, Consistent Dividend Growers [View article]
5 Highest Yielding, High Quality, Low Volatility, Consistent Dividend Growers [View article]
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5 Highest Yielding, High Quality, Low Volatility, Consistent Dividend Growers [View article]
5 Highest Yielding, High Quality, Low Volatility, Consistent Dividend Growers [View article]
5 Highest Yielding, High Quality, Low Volatility, Consistent Dividend Growers [View article]
5 Highest Yielding, High Quality, Low Volatility, Consistent Dividend Growers [View article]
Perhaps I should have said that the commenter was thinking in terms of out of date information. As of today, the pickings in the 4% realm are quite thin.
Thanks for that very good observation.