Main thing you are missing is the current high yield (due to low price). How much higher could it go before drawing in significant buying? I'm not a fan of the propane MLPs, however I wouldn't expect the yield to go much higher unless some event causes the entire MLP sector to be repriced to higher yields. Therefore I am thinking the price is close to the bottom (with the caveat mentioned above).
I did not miss the high yield. That yield, the impressive CEO and Jim Cramer, who is a sharp guy if you get past the theatrics all brought me here.
Yes, the yield is high and creates some floor, but the price you pay for the yield, that is my point.
Linn has a 7% yield with incredible growth since I purchased a few years back. Very similar to the growth of my holdings in CHK and DTV.
Right now the best buy to me is not NRGY in the MLP area. Take a look at BBEP. Price of shares to book value is 1 times with a 9% dividend.
I am not convinced that the execution problems of the last year or two justify paying a premium for NRGY over Linn Energy or BBEP. I own way too much Linn as it is my biggest publicly traded equity holding.
I come back to my original thought that NRGY is not worth double the price of LINE or BBEP in terms of what you pay per share to buy the balance sheet. The yields are all pretty close, but I see execution issues impacting NRGY. Does that continue for another year, holding down share price or even reducing share price? Again, why pay double for the assets of NRGY to what you can buy the assets of LINE or BBEP with comparable dividends, but better growth potential over the next year.
Still interested but propane is bucking a trend here, where is the growth going to come from in that area? Storage is an interesting potential but not fully realized.
I think markets are going lower due to the idiots in Washington, D.C. and their failure to reduce expenditures. It amazes me that our defense spending is greater than the next 20 largest countries in the world, combined? With the idiots we have running our country we need to invest in the very best companies as very good prices, not overpriced, that are enticing only for the higher dividend. Didn't mean to bring in politics to investing, but they are unfortunately intertwined.
richard I am an income investor so I hold only income investments. In my portfolio I hold 15 mlp's in size order below with my top holdings void of idrs but still investing in some mlps that pay idrs but at the lower end of my holdings. The reason I invest heavily in energy mlp's is I worked in the O&G industry for over 25 years for one of the top 3 companies in finance, strategic planning and A&D/M&A so I feel I understand the industry better than any other.
the reason I mention the above is I think nrgy will recover with their heavier capital focus in midstream/storage out of nyc citi gate and eagleford; even though it will take some time so now seems like a reasonable entry point. also as i have mentioned on this board before if they could move to 50% plus new investments in midstream like pvr is heading, nrgy would be better served in the long run
Richard, you have some valid points, and most of all, the tape doesn't lie. However, I am not sure that you can compare an exploration MLP like LINE with a propane/storage MLP like NRGY. The applicable metrics to compare in the MLP space are distributable cash flow (DCF) and coverage ratio, and you may be correct that LINE's is better than NRGY. I don't know about BBEP but do know that they have had their share of execution issues and I believe one of their larger shareholders has a ton of shares that they want to unload, which might be a drag on that stock.
Well you changed your complaint. Your original post stated that you expect 20% more downside in NRGY and other dire forecasts. That was what I questioned on the basis of the yield that would result. Now you are just saying that there are better MLP investments around, such as LINE and BBEP. This time I would agree with you: I own LINE and BBEP but no NRGY. I am not really interested in owning units of the propane MLPs...you can get almost as good a yield with better growth elsewhere.
My thinking exactly, Liza. Thanks for your comment. I have looked at NRGY several times recently with the idea of selling--I don't like selling so near what I see as a bottom. KMI is a new holding of mine, down because it is overshadowed by KMP, so I thought of swapping NRGY shares into KMI. Great prospects for growth--but a dividend of about 4.2% Look at what NRGY is giving you! And the storage aspect is very important today. I'm hoping NRGY management is paying attention to what pays and continues to focus growth in storage, for example, and not propane.