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  • Kinder Morgan And The Good, The Bad And The Ugly Truth Regarding Falling Oil Prices [View article]
    this is confusing. who said that 70% of KMI's business was in oil? Don't see that anywhere. And who said that was somebody's best comment?

    With regards to commodity risk, about a quarter of KMI's business is not fee based, so within that piece of the pie there is some commodity risk.

    As for Nat Gas, it is not imported but it can be exported, and will be in a couple of years. The US has more gas than it needs and there are some producers who are hoping/ expect that the export market will underpin the price of nat gas in the US. This is why some domestic buyers of nat gas, and NGLs, were lobbying to stop exports. So to some degree the global market may play a role in setting domestic gas prices down the road.
    Dec 17, 2014. 05:07 PM | Likes Like |Link to Comment
  • Kinder Morgan And The Good, The Bad And The Ugly Truth Regarding Falling Oil Prices [View article]
    Hate to say it but DrP79 is right. Lower prices driving higher volumes can be a recipe for success. Think about a pipeline where the costs are and you cut prices by 25% but get an increase in volumes as a result of that price cut. You have a lower margin on a per unit of volume carried but you're making more money. Maybe Econ Theory 102 is the class where they teach that.
    Dec 17, 2014. 04:25 PM | Likes Like |Link to Comment
  • Kinder Morgan And The Good, The Bad And The Ugly Truth Regarding Falling Oil Prices [View article]
    DAC, it is true that KMI generates fee based income, but it is not 100% fee based. The last report I have on KMP shows that 77% of income is fee based with the balance exposed to commodity prices. Not sure how that works out for the combined group but probably the ratio would not have changed much post merger.

    It would be interesting to stress test the cash flows using scenarios that include $55 oil, $3.50 natural gas and say $0.65 per NGL barrel. As noted by nblumstein above, KMI will not be covering its distribution on a cash flow basis. The guidance the company provided pre merger was obviously based on commodity prices that were different than what we are experiencing today. Under current commodity prices the cash coverage of the distribution could be even more challenged.

    No doubt they have a lot of levers they can pull, but as a C corp they will be held to different valuation standards.

    One thing I have noted is that XOM fell in sympathy with the price of oil during the last sell-off of the commodity. But half way through XOM started to outperform the market even as oil continued down for another month. The E&P companies and the oil service companies basically moves in sympathy with the price of oil throughout the sell-off. EPD performed in line with XOM at first then significantly outperformed XOM. The stronger players were thus bid up by investors because they were perceived as winners in a distressed industry environment.

    I'm not sure that KMI offers the same balance sheet and cash flow strength. Thus I would be looking elsewhere if I was trying to time the recovery in the oil price.
    Dec 16, 2014. 04:57 PM | 1 Like Like |Link to Comment
  • Weaker oil prices dim prospects for LNG projects [View news story]
    John, I had not thought about that. But I suppose it could.
    Dec 11, 2014. 02:54 PM | Likes Like |Link to Comment
  • Weaker oil prices dim prospects for LNG projects [View news story]
    A concern Mike is that these long term contracts for Asian LNG, which underpinned the massive investment by the likes of CVX and others, may not hold up.

    European buyers of gas from Gazprom signed long term gas contracts based on the price of oil and then managed to renegotiate those prices down as the price of natural gas fell. I believe that the Asian buyers of LNG may do the same. In this instance the buyers have more power. I'm thinking of China in particular, but Tokyo Electric as well.

    The same happened with iron ore. The buyers managed to go from the fixed contracts set annually by Rio, BHP, etc. to contracts based on the spot market.

    Once US LNG hits the ocean in 2017 the ability for the Asian based LNG producers will get even more difficult.
    Dec 11, 2014. 12:18 PM | 1 Like Like |Link to Comment
  • Amazon: Free Cash Flow Not What The Bulls Purport It To Be [View article]
    You said and implied that AMZN's valuation was justified because "disruptive innovative company". You then said that "taking a look at the list of top ten shareholders I do not think any of them need justification either". I pointed out that the same was said about Enron.

    The comparison was made because those two facts are not reasons to buy or own a stock.
    Dec 10, 2014. 02:55 PM | 4 Likes Like |Link to Comment
  • Amazon: Free Cash Flow Not What The Bulls Purport It To Be [View article]
    Gary, one word for you. Enron. Once a darling considered a "disruptive innovative company" that had a list of well known and respected shareholders. Not saying AMZN is committing fraud but if a company is not generating free cash flow at some point they will no longer be able to borrow money and the game is over. When bond and equity investors alike recognized that Enron was not generating cash the game ended.

    That will never happen to AMZN because they can always slow the pace of growth down in order to generate FCF, but how will investors continue to support a high stock market as the company's growth slows down?
    Dec 10, 2014. 01:46 PM | 4 Likes Like |Link to Comment
  • Will 'Invest In Europe' Be DOA ? [View article]
    Marc and Dapizz, I believe that a declining euro and rising equity market makes a lot of sense. It would be a contradiction if they were not positively correlated. This may be especially true for Europe where the large listed companies have significant overseas exposure. A weakening currency should at first lead to P/E expansion, based on investors expecting higher earnings driven by both translation and increased exports.

    From a bottom up perspective I find a lot of attractively valued European equities, and P/E expansion should overwhelm the negative currency impact on your European holdings, as was the case in Japan in 2013. But the hedged ETF HEDJ is a very good way to play Europe.

    Still waiting on the ECB to stop talking about and to actually start doing QE, or whatever you want to call it. If they do not expect the euro to rally a bit, which would hurt the case for owning European equities.
    Nov 26, 2014. 11:10 AM | Likes Like |Link to Comment
  • Google Faces The Problem Of Power [View article]
    I'm almost with you. Sold half my GOOG a week ago. Growth is slowing, even Sergei in an FT interview said that. He also noted they were looking for the next big thing.

    They are looking pretty hard based on the money they have spent this year on acquisitions and R&D. Search is an amazingly good high return on capital business, and GOOG is an amazing cash machine, but that money is all being spent on projects that are hard to handicap. This year they will basically spend all of their annual cash flow on investing for the future. Makes sense given that search is slowing. But hard to know if they can find something that can replace/ augment search.

    There is still growth, even if it is slowing, and they have a lot of cash and will generate a lot of cash going forward. It's just hard to figure out how to value a company when its growth is slowing and its investments are going into areas that are difficult to figure out. So took some off of the table.
    Nov 25, 2014. 05:04 PM | 2 Likes Like |Link to Comment
  • Does Mondelez Think It's Selling Cigarettes? Q3 Results Reflect New Pricing Strategy [View article]
    Nice article. Thank You. Will be interesting to see how they and their competitors respond to falling input prices (if and when they occur).
    Nov 6, 2014. 04:27 PM | Likes Like |Link to Comment
  • Overvalued Enterprise Products Partners Will Lag Peers For The Next Several Years [View article]
    Tim,

    Thanks for the article. It did made me think a bit more about my EPD position. I've owned it for some time and feel that it is still a hold. I don't agree with others who think they will raise their distributions to a level that reduces their DCF to something that is closer in line with the sector. Kinder is doing his deal because he was stretched and watched his cost of capital go up. Raising further capital to do meaningful deals would have been painful for existing Kinder unit and shareholder.

    EPD has a low cost of capital and will want to retain that. there seems to be plenty of opportunity still in midstream and I'm sure EPD will be doing big deals in the future to take advantage of those opportunities. Their pristine balance sheet will allow them to do those deals in an accretive way.

    Not adding more to this position, but happy to hold. It may underperform the sector for a while but the cost of selling means I would need a really compelling reason to get out. PAA has some good distribution growth ahead of it and a strong balance sheet. Also some nice exposure to the Permian Basin which offers some potential upside from oil/ condensate exports. New MLP money might go there.

    Thanks for the article.
    Sep 18, 2014. 02:46 PM | 1 Like Like |Link to Comment
  • Could Timmy's play in the U.S.? [View news story]
    There were a number of Tim Horton's in my neck of the woods, which is Rhode Island and Mass, but they seem to have retreated. Tough to compete in DNKN's backyard. In fact two THI stores that closed are now DNKN stores. The Burger King deal seems really all about taxes. Burger King will still be paying taxes in the US, where they make most of their money. But they want to expand more internationally and Canada treats overseas profits from from companies domiciled in Canada differently than the US does. I.e. Burger King will be able to repatriate profits from overseas and use those profits to pay dividends, pay down debt, buyback shares or invest elsewhere.
    Aug 28, 2014. 11:40 AM | Likes Like |Link to Comment
  • Dunkin' Donuts Blames The Economy And The Weather, Huh? [View article]
    The donuts didn't all of the sudden start tasting bad in the first quarter. The taste I'm pretty sure hasn't changed. The coffee hasn't changed either. There are a lot of people who like the place. The lunch food has been growing (though it doesn't do much for me) and I still see lines at the DD's in my neck of the woods. There are a lot of them. I live in Rhode Island.

    There is a large section of the population that would rather not go to a Starbucks and listen to the person in line in front of them ask for a double latte espresso with kale and a shot of whatever. There is definitely a market for what DD offers.

    There is also a market for franchisees that is very strong. DD has one of the best value propositions of major national chains. As a shareholder I am very happy with the 100% franchise model and the very high ROCE and related free cash flow the business generates for shareholders. This supports the share buybacks and the related high debt level.

    I see westward expansion as a great opportunity. To DD California and Nevada are "frontier" markets. It's pretty comforting when you can find growth like they have delivered without having to go to a real frontier market. However, it's possible California bombs for them. That's a risk to longer term growth (that isn't in anybody's model) and to the P/E, but not so much the business model.

    Following this year's poor performance the stock has performed in line with the market since purchased in 12/2012. If next quarter's earnings do not better last quarter's weak results (weak is all relative and vs expectations of course) when they generated 1.8% US same store sales, 4.6% overall sales growth and 14% EPS growth, then I will have to rethink the story.

    I'm left right now having to accept management's statement that the harsh New England weather (multiple work and school snow days), which I experienced was the cause of the miss. Management has been straight with shareholders to date and personal observation is supportive. The valuation is also now a bit cheaper than it was a few months ago.
    Aug 25, 2014. 04:25 PM | 3 Likes Like |Link to Comment
  • Kinder Morgan: A Good Example Of Why Investors Should Never Pay Attention To Wall Street Analysts [View article]
    If you own MLPs in an IRA you must pay tax on the part of the income that is considered unrelated business income tax” (UBIT). Under the UBIT rules, tax-exempt organizations and retirement accounts must pay tax on their “unrelated business taxable income” (UBTI). You can find your UBTI in the MLP's K-1. The tax on UBIT I believe is 39%. This is why MLPs are not considered appropriate for an IRA. There is nothing wrong with holding them in an IRA but you will have to pay the UBTI. The ETN AMJ is a way to get around this.
    Aug 22, 2014. 09:35 AM | 1 Like Like |Link to Comment
  • Kinder Morgan: A Good Example Of Why Investors Should Never Pay Attention To Wall Street Analysts [View article]
    Many of the KMI/KMP/KMR bulls are patting themselves on the back and declaring that Wall Street analyst got it wrong. If you go back to about the time of the EPB purchase the Kinder complex, even after the recent jump in the share, have still underperformed the Alerion MLP index.

    It will be interesting to see how the new structure plays out. Some significant tax bills we have to be paid by long term holders and I wonder how this will impact the entire MLP universe. MLPs offer tax deferral not tax elimination. Does a better understanding of this by unit holders weigh on valuation?
    Aug 22, 2014. 08:52 AM | Likes Like |Link to Comment
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