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Linn Energy, LLC (LINE) Message Board

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  • hirsct hirsct Mar 14, 2008 11:47 AM Flag

    massive underperformance by LINE - bizarre

    I'm mystified when I look at LINE's numbers and the foward looking nature of its ability to sustain the payout. Why is a business that appears so sound and well hedged continue to be pounded by the market, TO A GREATER DEGREE than stocks more directly tied to the fortunes of the misreable banking sector?

    Maybe it's the very structure of mlp's that don't allow their true value to be realized by the public. After a while, thinking you're smarter than everyone else doesn't make up for losing money every day.

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    • MLPs in general are struggling in terms of market price.

      I don't find it all that surprising since the stalwarts of the financial world are struggling too -- the difference, at the moment, is that the big financials are suffering from stupid investment and business decisions while many MLPs seem to have made good decisions.

      EVEP's management today spoke of the problems that MLPs will face in 2008 with acquisitions to grow -- they expect a significant reduction in MLP deals due to funding and cost of capital issues. Interestingly, they have been actively putting more hedges in place and I understood them to describe the oil and gas pricing market as "too good to be true". Oil and gas prices historically return to "the mean" and probably will do so again, even if it takes recession to force it.

      The marketplace is full of uncertainties and MLPs are not exactly the Fortune 500 -- they are a small sideshow which is pretty easy to ignore or disregard in uncertain times. If the stars of the economic universe are in trouble and people are avoiding them, imagine what the small fry face in terms of investor sentiment.

      If/when the markets regain some equilibrium MLPs should be more attractive. But the economic funk doesn't appear to be lessening.

      Personally, I distrust any market where money is made too easily. That usually means something is going to the let air out and often painfully.

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