Master Limited Partnerships: Pipe Dreams or Shark Jumpers? [View article]
The crash of 2008 was a market wide event affecting all classes of equities and not the result of an over bought MLP market which the author alludes to. Even so, as examples of "well known and managed MLPs" at the nadir March 09. 2009 Kinder Morgan Partners (KMP) closed at 41.15 and was paying about 10% annual yield; Enterprise Products Partners closed at 17.95 and was paying at that price an 11% yield - no "40% or higher yields". If one had bought at that time with the knowledge of the excellent underlying businesses a capital gain of 74% with KMP and 144% with EPD would be on the books in addition to the unmissed and growing dividends. As always, facts and good judgement make for profitable investments (and good reading), not hyperbole and fear.
Master Limited Partnerships: Pipe Dreams or Shark Jumpers? [View article]
I do not believe that the underlying businesses of most well known and managed MLPs are going away though certainly their unit price may decrease with macro (general market) and micro (leveraged owners of MLPs forced to sell) market conditions. If the price of units were to decrease as a result of such action I further believe that in this interest rate environment which is likely to be sustained a year or more, that there is a significant population of income investors who would step in to the breach to purchase the now less expensive, higher yielding MLP units. A fall in price would be viewed as an opportunity and thus substantially soften the harshness of the price decline. MLPs most significant risk, in my view, is unpredictable governmental action which might diminish or destroy their tax advantaged treatment (as occurred to the Canadian Income Trusts in the 2006 "Halloween Massacre").
Even With A Fiscal Cliff Deal, Stocks And The U.S. Economy Will Unravel In 2013 [View article]
Nothing new under the sun: "A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largesse from the public treasury. From that moment on, the majority always votes for the candidates promising the most benefits from the public treasury with the result that a democracy always collapses over loose fiscal policy, always followed by a dictatorship. The average age of the world's greatest civilizations has been 200 years... The American Republic will endure, until politicians realize they can bribe the people with their own money."
2 Monthly Dividend Stocks To Buy And 3 To Avoid [View article]
Atlantic Power in its current evolutionary phase is primarily an asset growth story. In 2011 AT completed its acquisition of Capital Power and thereby increased its power generating capacity by more than 140%. Post merger it also purchased a 30% interest in an Idaho wind farm and a 51% interest in an Oklahoma wind farm - showing AT's post merger financial strength. Cash flows rose 94% in the fourth quarter reflecting in part the contributions of the power generating asset growth. Distributable cash flow ( DCF), not earnings per share, is the best metric to assess the financial success and dividend safety of this business. DCF rose 25% for 2011 and could not reflect the new asset contributions in full but would reflect the asset acquisition and integration costs - this gave a full 2011 dividend payout ratio of 105% but was well within managements guidance; payout ratio is guided in 2012 to be between 90 and 97%. Also, as not stated above, the dividend was increased 5.1% with the Capital Power acquisition. The biggest business challenge to AT is likely depressed power prices which if they persist or worsen could erode margins, but as pointed out in the article, about 75% of ATs plants are natural gas powered (thus helping margins) with the rest renewable power generation under long term contracts. I believe AT's current story is a good one with solid management that has been transparent and effective and accordingly I invest with them - but, differing opinions make a market.
Rough Day for Master Limited Partnerships [View article]
In the politics of envy, property is theft. No investment apart from government issued municipal bonds is safe from governmental meddling and those bonds are subject to governmental incompetence.
Why MLPs Are Extremely Overvalued As An Asset Class (Part 1) [View article]
Sorry, don't buy it. Forget solid businesses with hard assets, deep moats, contracted and predictable income streams, long histories of solid dividends, and significant tax advantages - listen instead to my metrics.. I know, I know...all will soon be divulged grasshopper...
Kinder Morgan Energy Partners: Dividend Stock Analysis [View article]
"Earnings" are not the best metric for judging MLP financials from a yield standpoint - distributable cash flow is the key metric. Therefore using a P/E calculation as a metric to compare an MLP to a stock is misleading. Additionally, MLPs have considerable tax advantages to their distributions which are not available for telcos.
Alpine's Total Dynamic Dividend Fund: Overdosing on Financial Engineering [View article]
I for one only read Seeking Alpha to obtain opinions bearing on my investing and to obtain information that I may have missed in my research. The article that Mr. Plettner published on AOD was timely, factual and easily verified. His article is precisely why I read Seeking Alpha and if this type of information is proscribed on Seeking Alpha the site would be mere retrospective financial pablum and certainly not read by me. Of course, I expect any author to act on the basis of his point of view just as I and any logical investor does. I salute Mr. Plettner for sharing his point of view and the basis of his decision making - Seeking Alpha is indeed fortunate to have him as a contributor and his recent contributions should stand as a site model.
Atlantic Power Cuts Dividend And Adopts A 'Poison Pill' Plan [View article]
This may be an instance where there is a true cause for share holder class action. Given the recent public statements as quoted above one can only conclude that the CEO was deliberately misleading share holders or he was grossly mismanaging the company. These facts coupled with share holder anger at being duped are the stuff of punitive litigation - sign me on.
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.
Sleep at Night Investments: Utility Preferred Shares [View article]
Thank you from a fellow Houstonian for an article that is both clear and actionable. This is the type of contribution that makes SA valuable to its readers. Congratulations.
Can't our Seeking Alpha writers think of something better to scribe than a rehash of a TV interview? And to use the Black swan inappropriately at that. Come on guys, how about some original thinking not just self promotion as an "author". I believe it is now common knowledge among Seeking Alpha readers that there may or may not be a Municipal Bond problem - just another brick in the ever present "wall of worry".
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."
Apple (AAPL -0.2%) roundup: 1) Leon Cooperman liquidated his 266K-share stake in Apple in Q4 (13F). Cooperman gradually built his position over 2 years. 2) Bloomberg adds its name to those reporting an iWatch is in development (previous). ~100 product designers are reportedly working on it. 3) Jefferies Peter Misek believes iPhone 5 build orders have been slashed to 30M from 40M, but thinks this is due to an upcoming iPhone 5S launch. Misek, whose track record with iPredictions is spotty, also expects a 4.8" iPhone, but not until mid-2014 due to display yield issues. [View news story]
What a terrible and troubled company Apple is - may not last the week...Please everybody, if you own this terminally distressed company go sell your stock immediately ---(so I can buy some more)...
Master Limited Partnerships: Pipe Dreams or Shark Jumpers? [View article]
Master Limited Partnerships: Pipe Dreams or Shark Jumpers? [View article]
Even With A Fiscal Cliff Deal, Stocks And The U.S. Economy Will Unravel In 2013 [View article]
"A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largesse from the public treasury. From that moment on, the majority always votes for the candidates promising the most benefits from the public treasury with the result that a democracy always collapses over loose fiscal policy, always followed by a dictatorship. The average age of the world's greatest civilizations has been 200 years... The American Republic will endure, until politicians realize they can bribe the people with their own money."
-Alexis de Tocqueville 1805-1869"
2 Monthly Dividend Stocks To Buy And 3 To Avoid [View article]
The biggest business challenge to AT is likely depressed power prices which if they persist or worsen could erode margins, but as pointed out in the article, about 75% of ATs plants are natural gas powered (thus helping margins) with the rest renewable power generation under long term contracts.
I believe AT's current story is a good one with solid management that has been transparent and effective and accordingly I invest with them - but, differing opinions make a market.
Rough Day for Master Limited Partnerships [View article]
No investment apart from government issued municipal bonds is safe from governmental meddling and those bonds are subject to governmental incompetence.
Why MLPs Are Extremely Overvalued As An Asset Class (Part 1) [View article]
I know, I know...all will soon be divulged grasshopper...
Kinder Morgan Energy Partners: Dividend Stock Analysis [View article]
Alpine's Total Dynamic Dividend Fund: Overdosing on Financial Engineering [View article]
Atlantic Power Cuts Dividend And Adopts A 'Poison Pill' Plan [View article]
20 Companies to Avoid [View article]
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]
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.
Sleep at Night Investments: Utility Preferred Shares [View article]
Muni Bonds: 2011's Black Swan? [View article]
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]
"
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."
Apple (AAPL -0.2%) roundup: 1) Leon Cooperman liquidated his 266K-share stake in Apple in Q4 (13F). Cooperman gradually built his position over 2 years. 2) Bloomberg adds its name to those reporting an iWatch is in development (previous). ~100 product designers are reportedly working on it. 3) Jefferies Peter Misek believes iPhone 5 build orders have been slashed to 30M from 40M, but thinks this is due to an upcoming iPhone 5S launch. Misek, whose track record with iPredictions is spotty, also expects a 4.8" iPhone, but not until mid-2014 due to display yield issues. [View news story]