Beware the illusion of yield, says Jonathon Jacobson, the founder of Highfields Capital Management, speaking at today’s Ira Sohn Conference.
“Beware,” he says, of AT&T (T). Wireline is a melting ice cube and wireless is becoming more competitive. Also “beware” Linn Energy (LINE), because half of its distributable cash flow from “hedging games.” (See the latest Barron’s story.)
And another name on the beware list: a real estate investment trust Digital Realty Trust (DLR). It is a $69 stock worth $20, Jacobsen says. It has a $9 billion market cap, and a 4.6% yield.
This guy will not have the staying power to hold through the dividend cycle. At least now we know who is behind the attack, and he's still stuck!!!!
From today's Barron's a bit more color to they story:
In discussing companies with what he called illusory yields, Jacobson briefly warned about Linn Energy (LINE), subject of a bearish Barron's article last week. Jacobson argued that "half of Linn's distributable cash flow comes from hedging gains" and that the company needs access to the capital markets to fund its distribution.
Another vulnerable high-yield stock, he said, is AT&T (T), whose cash flow has flattened. AT&T also is exposed to any weakening in the wireless market.
Of course it does Rlp'D showing you ignorance.
The hedge book secured revenues exactly like it is designed to do! Good for management. They did better than all the other EPs managing mature assets. Much better so the units are at a premium.
The question is what can they build their swaps on five years out?
Once again you find nonsense to post which you will not defend as is required of Americans who would strive for our Founder title American Patriot.
Given constant human nature the constant din of the primitives demand stuff and respect is not surprising.
What is surprising is the number of Americans who came to believe a churlish emotional condition is a protection for juvenile opinions under Free Speech. Actually free speech exists to blow the emotional chatter out of the conversations of the Just common sense adults!
On this part:
" Also “beware” Linn Energy (LINE), because half of its distributable cash flow from “hedging games.” "
That (distributable cash flow) seems to apply to all the MLPs.
Maybe that author can check on the 50 members of the Alerian index for example and tell us how the distributable cash flow is somehow different for LINE than for all the others,
and exactly what "hedging games" are the "games" since most E&Ps do hedge.
Maybe we should email the article about how linn's hedges are the best in the business....
So they were the best in hedging and now they are hedging games....I think they should explain just why a little more.
Jack had done a clear write-up that is searchable here at the LINE board that seems like it might clear up any misunderstanding.....and I see no games but I would like to know more, so I would like to know exactly what they are calling games.
It is amazing. LINE management sees the glut coming and extended out their ngas hedges to 5+ years and diversifies into oil. Not foresight and market understanding but hedge games now. WOW -
All targeted at individual owners.
There is a fresh presentation from the Stifel_Nicolaus conference on Linn's web site.
If you think there is anything beyond innuendo from the shorts or barron's you are going to be severely disappointed. Linn explains what they have and how they account for it. If for any reason you think it should be different ask IR or sell.
THere is no question LINE is accounting for hedges correctly. There is no question that the hedges have been profitable to various degrees so far.
The Hedge fund wants you to dump your shares because they say not to count the hedges benefit from various accounting lines and they say options should be considered an expense the day it is purchased. Line counts options as capital until they are used, at which point the full cost and benefit are booked.
This guy is not going to stay short T or LINE at a cost of at least 10% a year (minimum interest on shorts is 2% best case plus you have to cover the dividends). As his position starts to lose he will be charged higher rates to reflect the risk.