Daniel Hansberger

BP Prudhoe Bay Royalty Trust Overvalued By 30% In This Price Environment

Given the low interest rate environment, investors are being forced to seek yield in a number of other riskier investments including royalty trusts, MLPs, and mREITs. However, it appears as though a lot of these investors are buying yield without regard for proper share price valuation. BP Prudhoe Bay Royalty Trust (NYSE:BPT) is an example of a trust where the share price has been seemingly propped up to an overvalued share price. It is currently trading around $90.00/share, which is $28 higher than its discounted NPV. The stock boasts a handsome 12% yield, but as the model will show below, there is only $62/unit left to be paid out in discounted distributions even with "optimistic" assumptions. This makes...

Join Seeking Alpha PRO to read this archived article and 11,574 other archived articles
FREESA PRO MEMBERS
IDEA GENERATORXExclusive access to 10 PRO ideas every day
INVESTING IDEAS LIBRARYXExclusive access to PRO library of more than 15,000 ideas
SECTOR EXPERT NETWORKXExclusive access to all sector experts for direct consultation
PERFORMANCE TRACKINGXTrack performance of all PRO stock ideas
PROFESSIONAL TOOLSXProfessional Idea Filters to zero-in based on industry, market cap and more
PRO Top long ideas returned 21.7% in 2016**
"As a PRO member, we get uniquely valuable perspective that go beyond our quantiative analysis... We rely on PRO to get beyond the numbers quickly and add much needed perspective. It keeps me ahead of the next big thing. - Mark Choate, Malaga Cove Capital"
Mark Choate, Malaga Cove Capital
"Contributors (writers and commentators), often have a long history in the secuirities they opine on and some are clearly well positioned industry participants with detailed industry views that can help provide color on where the skeletons are buried in a particular secuirity and/or industry."
Jim Roumell, Roumell Asset Management
You may cancel at any time for any reason, and receive a prompt refund for membership on months paid and not used (max. 6 months). Details