Richard, what you are missing is that NRGY began to transform itself into a midstream storage MLP with several acquisitions over the last couple of years for the very reasons you mention. Another poster posted the splits between revenues and profits generated by the propane and the midstream business. The reason the stock price is down is not so much that they are stuck in a low-growth sector (propane) but more to do with their execution.
They also acquired their general partner last year to eliminate expensive IDRs.
The MLP sector has outperformed since last year, but within the sector, there are laggards. The market seems to be rewarding those MLPs with above average distribution growth and those that have exposure to the shale gas regions and NGLs
convinced that NRGY should be in my portfolio. The question is timing. When.
I like to buy when a company is in transition and shares are in decline. NRGY in my opinion is one of the pricier MLPs. Perhaps that has a little to do with the Cramer effect.
Our country is in sad economic shape. Add that to idiots in Washington and that is a toxic mix. The House just went on vacation without funding the FAA. No budget so 70,000 construction jobs are lost for the month. Those people will apply to their states for unemployment. That and the fact Congress did not extend the FAA airline ticket excise tax. So the government does not receive $200 million a week. The airlines are collecting the money and keeping it for themselves because the tax expired.
The idiocy in Washington makes me think the markets are going to have a tough time until the politicians demonstrate that they care about jobs. Obviously the do not. We should have an energy policy that provides federal tax credits for switching from diesel and gas to natural gas on all trucks. The natural gas industry could put millions to work if we kept the billion dollars per day we send to foreign countries for their oil to run our trucking industry. The government provides $6B per year in credits to the ethanol industry to increase the use of corn in fuel, which drives up corn prices and therefore, feed stock that grows all of our protein. But what kind of job creation is that. That is government money for big farmers.
Our defense spending in this country is as much as the next 20 countries combined. How crazy is that. Just looked at the numbers on Wikipedia.
Sorry for the tangent. But the country is so screwed up right now.
This market could fall off a cliff if these Congressman keep doing what is best for special interests and their Congressional district. The government just approved building a $700 million bridge in a Congressman's district. There were two plans for the bridge, one at $350 million and one at $700 million. They gave the Congressman what he wanted, more pork in his district.
We are at the precipice and the markets are not very stable. What will the markets do if we keep seeing job losses?
If NRGY is not going to report any significant news in the next several quarters don't I see a much lower price for entry?
Well, Richard I think you got your market selloff today and we still have to get through the unemployment numbers tomorrow (Friday).
I agree with many of your sentiments re Washington and our energy policy. But truth be told, the MLP companies are building pipelines and plants without the govt's "help." North Dakota, home of the Bakken shale, has 3% unemployment. Thousands of jobs have been created in Pennsylvania because of the Marcellus and the same will happen in Ohio because of the Utica. As for converting to nat gas, many state and city owned vehicles already run on nat gas as a result of the need to comply with air pollution rules. But you are correct that they need to convert non-govt commercial vehicles and eventually individual vehicles.
As for your idea for NRGY to sell their propane to one of the other propane companies, (i) the propane part of the business provides a significant part of the cashflow for their investment in midstream, (ii) competitors are not likely to pay up for it -- many, including NRGY, are growing propane by buying smaller independent dealers, (iii) there would likely be a large tax gain on any sale of the propane assets which would have to be paid for by unitholders and (iv) there could be antitrust issues. Eventually a spin off could be considered. I am sure that NRGY spends a fair amount of time looking at this issue and would pull the trigger when the time and price were right (after they grow the midstream business more).