We can quote you if you prefer:
"As you say, that chart is not including reinvestment. Since LINE talks about their return with reinvestment, thus AMZ is not the right comparison. You need to look at ^AMZX not ^AMZ. For precisely this reason Alerian provide two index series: one including reinvestment and one without."
YOU said that Alerian includes reinvestment.
Would you like to correct yourself first, before it is done with some links and some helpful data?
This Linn Energy's return is with LINE reinvested dividends since its IPO:
The return with Linn reinvested dividends looks to me like about 346.2% return since they went public,if you use that calculator
Isn't that correct?
So, now, what is the total return on the Linn presentation slide and which Alerian index does it compare to?
Not the one you kept insisting that Mr. Rockov must have been comparing....right?
It is right there on the bottom of the Linn slide in that May 2012 presentation.
And, the total return for Linn is stated on that slide as 204% (May 2012 Linn presentation) compared to Alerian (TR) of only 132%.
It sounds like you're frustrated, and probably for good reason. The company is well hedged and therefore common logic would suggest better overall share price performance.
HOWEVER, if you read through every single post that followed your initial outcry of frustration, you will virtually have every tool you need to sensibly decide whether this is your cup of tea.
In terms of appreciation, take Sand's advice and study those slides he delineated for you. Take any specific situation and you can satisfy yourself regarding efforts at making this work.
Take the Granite Wash, the area which is most exciting for me personally. Linn has several hundred drilling locations identified--and they almost always bring in a profitable well in that area. But they're still exploring it--jabbing around in different layers. They used to just go for the Atoka Formation in that area, but it's a mile deeper than the Kansas City, which is basically a thing called the Hogshooter. It's not shallow, but it's shallow relative to the other layers--and Linn has said they're willing to shift resources to drilling out this more accessible formation if the market goes to hell in a hand basket. They could go back in and drill out those deeper layers using pad drilling without shutting in production.
Stuff like this is mind-boggling!
These people now have three or four potential drilling locations mostly supplied by good pipeline infrastructure. I'm a rank amateur--and this is my encore career--but I'd say there is plenty room for capital appreciation here. I suppose the Black Swan could swoop in and take a crap on my whole outline, but I hope not.
LINE seeks to be a low cost as well as a low risk producer. Which provides a layer of protection beyond the hedging should the ‘flocks of black swans’ we all see decide to land in America.
The ability of LINE to get long term and low rate debt is no accident. There are benefits even if perhaps it seems nothing happened.
I think this business model which is carefully balanced not only to be prepared for the unexpected but able to exploit the opportunities is very much under appreciated. Stability simply is not as exciting as stretching out for that extra point but it is worth far more.
I agree completely on trading range bound stocks.
I have a couple of c-corp GPs that I trade frequently (WMB, KMI, XTXI). If it drops, I don't mind holding them because I know long term they are going up so I can play them and pick up some nice returns in the interim while the market moves sideways.
I'd prefer not to "day trade" but the risk is low so why not. I typically won't buy something I wouldn't want to hold 5 yrs..so I why not shave a percent or two here and there...
RRB, if Linn can manage an annual 5% distribution increase over the next several years, I wouldn't term that pedestrian. I don't know where else to get 8% interest (10% for me based on my avg. buy-in) from the get-go plus 5% compounding increases beyond that.
And Linn being pretty range-bound makes for some short-term trading ops. I made two (unusual)yesterday buying in at 35.81 and selling at 35.98 both times. Today I had a trade buying at 35.83 and selling at 35.96. And at day's end I bought back at 35.81, hoping to sell near Monday's open. (4K on margin each time.)Finally I sold 50 Oct. puts at a 34 strike. I kind of like range-bound so far and am hoping it continues, along with the nice 5% annual dist. bumps.
couple of points to add
1) buying to catch div and selling after drop is recovered has to be really hard and you have to do something valuable with the stock in between sale and repurchase that outperforms the stock
2) come on guys range bound, what is the time horizon. Stock is up 70% in 10 years, 8.5% in 5 years, 84% in 3 years. Yes, its been kind of crappy for 2 years(if you measure today after a huge slide in commodity prices) but come on, how many stocks have really done great
3) Not like a bond, this dividend goes up, it doesn't stay flat
Hasn't been public for 10 yrs. Sorry your info must be bogus.
Also, if you'll notice, I stated it has an 'inflation protected rising coupon'.
As has been stated before on this board...past performance is no promise of future returns.
Linn has become so large that it is becoming very difficult to achieve anything more than pedestrian distribution growth...of course, the flip side is that you get stability. I think that is what people are refering to when they call it a "bond". You get a fat distribution and perhaps some capital appreciation but make no mistake about it, other than some sudden uplift in commodity prices...Linn is going to struggle to achieve anything more than moderate growth. They are servicing $4.7 billion in debt plus paying out over half a billion in distributions annually. That leaves very little cash for growth...so growth must come from acquisitions or via drilling which must be funded via equity raises or debt issuance. With cost of capital over 8%, you need to get mid to high teens returns to get decent accretion.
OH I thought we were arch conservatives together.
Even though I am actually a Constitutional Democrat. Which means I actually believe Democrats can hire ethical leaders rather than those who simply claim to be. Otherwise sooner or later you have the failure like California, Chicago or Obama.
Feinstien usually makes me crazy but she is ethically and intelecual honest as example. She will often take up unpopular causes like spent nuclear fuel storage or corn based ethanol corruption. So I am not surprised she would take on the ciritcal issue of our allies getting killed or jailed dur to Obama security leaks.
Many thinking Democrats are now calling themselves Truman Democrats. It is a welcome and important change.
You need to view Linn as the rough equivalent of an income-producing bond rather than as a capital gains vehicle. Otherwise you're bound to be disappointed by its fairly narrow trading range. But you could take advantage of the latter, I think, by, say, selling the Oct. 34 puts for a buck and a half. Then anything over 32.50 will make you money, and LINE seems unlikely to drop to that low price as I see it.
Agreed. Linn seems range bound. Won't go much lower due to hedges protecting cash flow for about 4-5 yrs...yet, due to the fact that the hedges are at way above market prices...it will be hard for them to generate any incremental upside on the production hedged via puts due to current prices being so far below the put prices.
So, as you said, you get a bond (with a somewhat inflation protected rising coupon).
Any significant upside will have to come via organic growth (drilling, re-works, recompletions etc) or from purchasing existing production.
If you look at Linn relative to almost all other E&P MLPs, you will find it is far more stable likely due to the hedges but perhaps also due to having a very liquid float.
If looking for E&P MLPs that might offer significant capital appreciation look at ARP and perhaps MEMP (which has decent hedges going out 5 yrs but only at about 80% of production volumes..).