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  • richardleeds richardleeds Aug 3, 2011 3:08 AM Flag

    why NRGY is at low for year and

    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.

    thanks all, R.

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    • 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.


      At times I have also held wpz, enp, nsh and tlp

      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

      • 2 Replies to moneyonomics
      • really appreciate your comments. NRGY is allocating resources to more dependable cash flow. I like that. The problem is they have been doing that during the last year and it looks to me that they have another year to go on that.

        So if investors see no significant change during the next four quarters, this is unforgiving market in my opinion.

      • especially appreciated your thoughts on NRGY and trying to tap into the Eagle Ford.

        Why not sell the propane business to one of the other bigger MLPs in propane and use the proceeds to tap into the Williston and Utica shale basins.

        Over the next three years the drilling rig counts in those two recent plays are going to go through the roof and there is little infrastructure to support the areas.

        Would this not be a better strategic move for NRGY?

    • 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 can get almost as good a yield with better growth elsewhere.