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  • Renewed worries over cash flow? MLP liquidation pressure? There's no apparent news behind today's weakness in Linn Energy (LINE -3.5%), LinnCo (LNCO -3.7%) and Berry Petroleum (BRY -2.8%). LINE and LNCO plan to acquire BRY for $4.3B, the first-ever acquisition of a public C-Corp by an upstream LLC or MLP. [View news story]
    Occurring in a setting of a seemingly cyclic MLP sell off though exaggerated with LINE. Higher interest rates on government bonds are thought to be pressuring yield stocks as well and with recent institutional ownership of MLPs there will be more myopic volatility.
    For me, a buying opportunity to secure a decent yield which my research suggests is relatively safe.
    May 31 01:07 PM | 3 Likes Like |Link to Comment
  • Use Linn Energy To Build Income Now [View article]
    Keeping the MLP until it becomes part of your estate is the best option as the value resets and no tax is owed by your inheritors if sold immediately. However, even if sold by you, postponing taxation also has the advantage of capturing the "time value" of money which is not insignificant.
    As there seems always to be a fair amount of confusion regarding MLP taxation principles I suggest a visit to the National Association of Publicly Traded Partnerships
    And of course there is LNCO for those allergic to complexity...
    May 19 12:02 PM | Likes Like |Link to Comment
  • Use Linn Energy To Build Income Now [View article]
    There is no risk free lunch anywhere. Pipelines will eventually be built to equal capacity and these companies will then need to struggle to grow. E & P companies will continue to acquire/find assets and develop them to sustain their growth just as McDonald's will develop new menus and GE will improve their jet engines to stay competitive. Life and the market as a reflection is striving amid competition, accompanied by risk, with those who plan and execute best most often winning. So far the management of LINE has planned and executed quite well.
    May 18 04:17 PM | Likes Like |Link to Comment
  • Use Linn Energy To Build Income Now [View article]
    As is usually the case it condenses to the matter of whom do you trust? I choose LINE management with recognized external supporting experts such as Elliott Gue Pays your money and takes your choice...
    May 17 04:35 PM | 3 Likes Like |Link to Comment
  • Linn Energy (LINE) -5.1% premarket after a weekend Barron's article warns of a sharp drop if the dividend gets cut. LINE's 7.5% dividend yield has supported the company's high unit price even as its fundamentals have faded; in Q1, LINE failed to produce enough cash to cover its distribution, even by its generous measure of distributable cash flow. LNCO -6.8% premarket. [View news story]
    I think the smoke in this instance is being generated by a fire extinguisher salesman....
    May 6 04:11 PM | Likes Like |Link to Comment
  • Linn Energy (LINE) -5.1% premarket after a weekend Barron's article warns of a sharp drop if the dividend gets cut. LINE's 7.5% dividend yield has supported the company's high unit price even as its fundamentals have faded; in Q1, LINE failed to produce enough cash to cover its distribution, even by its generous measure of distributable cash flow. LNCO -6.8% premarket. [View news story]
    Of interest is the following email sent to Barron's in response to the renewed attack on LINE/LNCO by the same author.

    To the Editor:

    Is Andrew Bary in the pocket of the Linn shorts? Does anybody at Barron's edit his work before it is published? Here are some reasons why, in my opinion, the answers to these questions seem to be, respectively, yes and no.

    Mr. Bary's latest specious smear piece on Linn ("Twilight of a Stock Market Darling, May 6, 2013) raises many questions about whether Mr. Bary--and, indeed, Barron's--ought to be viewed as credible. Here are a few:

    1. Mr Bary starts his article by saying that Linn's units "may" be worth less than the market price. To say that the units "may" be overvalued is to say nothing at all. They also "may" be worth more than the market price.

    2. But that lapse in logic pales by comparison to that contained in Mr. Bary's next paragraph. Apparently disappointed that his prior attack on Linn didn't cause the collapse of its unit price, Mr. Bary actually attributes Linn's unit price sustainability to the claim that Linn's investor base mistakenly believe that Linn is a midstream, rather than an upstream, MLP. That allegation is obviously unsubstantiated and patently incapable of substantiation. By the way, in my experience and from reading relevant comments on Seeking Alpha, Linn's investor base appears more sophisticated than Mr Bary or his editors.

    3. Mr. Bary also sees dire consequences because in one quarter with serious winter weather problems incurred by many exploration and production companies, not just Linn, distributable cash flow was less than its distribution, although its annual distributions (including the contemplated increase in Linn's distribution) is projected to be more than covered by distributable cash flow. There are scores of MLPs which often have a quarter in which exogenous events cause distributable cash flow to fall below their quarterly distributions only to have the distribution covered annually.

    4. Mr. Bary next attacks Linn's production, but look carefully at how he does so. Because of the winter weather issues Linn's first quarter production was 796 mmcf/d, which Mr. Bary trumpets was "down" from the 800 mmcf/d in the 4th quarter of 2012. The difference between the 800 mmcf/d in the 4th quarter of 2012 and the 796 mmcf/d in the storm ridden first quarter of 2013 is so small and the result of the inclement weather that it hardly seems the making of a trend, much less a disaster. Yet when comparing the 796 mmcf/d in that first quarter with the 782 mmcf/d in the third quarter of 2012 Mr. Bary says that this improvement (which is more than 300% greater than the miniscule shortfall in the stormy first quarter)is "little changed".

    5. Mr. Bary then points out that under GAAP accounting Linn habitually loses money. But so do many--if not the vast majority of-- -MLPs. Nobody who is a serious MLP investor looks at the GAAP earning of limited partnerships. For upstream companies like Linn, GAAP accounting is distorted by heavy depletion and intangible drilling cost write-offs. Mr. Bary ignores these inconvenient facts. In fact he never even mentions the words "depletion" or "intangible drilling costs".

    6. Mr. Bary then re-visits the derivative accounting issues raised in his prior negative article, and once again he fails to note that Linn's accounting for distributable cash flow is based upon the very same rules required by the Financial Accounting Standards Board in accounting for derivatives for GAAP earning purposes. This is a meaningful omission.

    7. Mr. Bary relies for his thesis on hedge fund analysts and principals quoted in the article. Another serious omission is a disclosure of whether these sources are or have been short Linn and, if so, the extent of their short position. It is hard to give much weight to the Hedgeye allegation that Linn, which has a $2.90 distribution even before its contemplated increase post- Berry acquisition, is only worth between $5.48 and $18.17 and a likely inference is that Hedgeye or its clients have a short position in Linn.

    8. Finally, it makes little sense for Mr. Bary to compare Linn to the major integrated slower-growth companies such as Exxon Mobil and Chevron or even to exploration and production companies such as Newfield or Devon. Linn, as an LLC considered for income tax purposes as an MLP, is not a taxable entity. Pass-through entities such as MLPs have a lower cost of capital than C corporations. Linn's distributions to unit holders are tax deferred. Linn's yield has been consistently orders of magnitude higher than the C corporations to which Mr. Bary and his hedge fund sources compare it."
    May 6 01:49 PM | 5 Likes Like |Link to Comment
  • Beware Of Covered Call Funds [View article]
    My principal concern is not the correlation of varying CEF funds with either a bull market (leveraged equity funds usually preferable) or a flat to down market (buy write option funds usually better) but rather the authors assertion that many of the buy write funds such as ETV (which is among Mr. Albo's long standing buy choices) are providing destructive return of capital: " ETV, have a total return lower than distribution rate. This is a red flag that the high distributions came at a cost of reducing the NAV, in other words, these were examples of destructive ROC." I do not believe this is the case. I would suggest that this may appear to be the case if one compares the distribution to the NAV distribution only, forgetting that the actual distribution percentage is a function not of just the NAV distribution but also the market price which in these CEFs is often significantly discounted from the NAV.
    Apr 8 03:06 PM | 2 Likes Like |Link to Comment
  • Beware Of Covered Call Funds [View article]
    How do you reconcile your view of these funds with Seeking Alpha's CEF guru Doug Albo?
    Apr 8 01:27 PM | 1 Like Like |Link to Comment
  • Avoid Atlantic Power [View article]
    AT has an untrustworthy management whose most recent activities have been designed to protect themselves - "poison pill" reported with its poisonous quarterly report, and now an "advance notice" amendment to prevent shareholder activism. This management is the epitome of scandalous actions that betray shareholder trust in favor of management's interests. The importance of the Florida holdings to Distributable Cash Flow was known to the management and submerged in only a 2010 10-K - not pointed out in any subsequent reports or presentations of which there were many.
    The holdings may have value but the management can not be trusted and in fact should be reviled for their lack of candor. Holding AT is likely holding a false hope. Mistakes can be made, but purposeful deception cannot be exonerated.
    Apr 2 02:31 PM | 3 Likes Like |Link to Comment
  • Analysts think Pembina Pipeline (PBA +0.9%) has more room to rise even after its expansion into pricier fuels such as propane and ethane has helped it generate the best total return among Canadian peers this year. With the expansions, PBA "cements” its position as top provider of fractionation services in western Canada, and is "starting to look like the Enterprise Products Partners of Canada," FirstEnergy Capital says. [View news story]
    Agree. A major position.
    Mar 27 04:15 PM | 2 Likes Like |Link to Comment
  • It's understandable that MLP investors would be irritated as several - Calumet Specialty (CLMT) and Access Midstream (ACMP) are the latest - again revisit the trough for more capital and dilute their holdings, but demand for MLPs is so strong that unit prices of some involved in recent financings - BWP, DPM, EPB, EPD, MCEP - already have recouped initial losses and gained since their announcements. [View news story]
    This "news clip" shows again a basic misunderstanding of MLPs.
    The share issuance is a relatively inexpensive capital acquisition tool with which to expand the underlying business and thereby distributable cash flow. It is often misperceived as "dilution" which it would only be if the MLP had poor management that did not use the capital for accretive purposes.
    Mar 26 07:07 PM | 6 Likes Like |Link to Comment
  • By a 75-24 margin, the Senate has passed a non-binding vote of approval for a bill allowing states to collect sales taxes from online retailers with $1M+  in annual sales and no presence within a given state's borders. The margin of victory suggests a filibuster shouldn't be a problem when a binding vote is made. Amazon (AMZN) and eBay (EBAY) have already begun collecting in a number of large states, and many investors have already assumed collections will expand in time. (previous[View news story]
    Thomas Jefferson:
    * I think myself that we have more machinery of government than is necessary, too many parasites living on the labor of the industrious.
    Mar 24 06:06 PM | 2 Likes Like |Link to Comment
  • Out Come The Big Guns: Atlantic Power Investigations Launched [View article]
    Mar 20 07:26 PM | Likes Like |Link to Comment
  • Equity CEFs: Income Strategies For All Market Seasons (Updated) [View article]
    In choosing a CEF equity fund according to the above stated guidelines would an investor, for example, review the above option income table in a steady to flat market and make a choice based on a). lower "% diff Nav & Mkt" suggesting intrinsic Nav growth b). a fund with a greater discount suggesting better valuation c.) a fund with middle of the road yield but generous (say 8 -9 %) suggesting less chance of principal return d.) ignore distribution cut history or consider a recent cut a positive if it led to decreased market price ?
    Mar 20 06:14 PM | Likes Like |Link to Comment
  • Goldman Sachs takes its rating on Kimberly-Clark (KMB) down to a Sell rating from Neutral with valuation on the defensive stock played out. The firm sets a price target on shares of $91. [View news story]
    For traders, not long term investors.
    Mar 18 11:29 AM | 1 Like Like |Link to Comment