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PAA Natural Gas Storage, L.P. Message Board

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  • rudfox rudfox Mar 25, 2011 4:03 PM Flag

    Growing Disenchanted

    Disenchanted? Makes sense. I don't know if PNG is undervalued or if it is just going to remain a dog that was initially overvalued.

    Manipulated? How do you come up with that? Yes it is low volume... 53000 shares per day average of late. It's a free market. Put your bids in. There just is not a big market. So spreads are naturally wider. If you can take a look at the level 2 quotes, you will see there is not a lot of depth in the bids. So if somebody were to enter a market order to buy or sell 500 units, you would see some price spiking up or down. There are a limited number of buyers near the last transaction amount. There are a limited number of sellers with orders entered near the last transaction amount. If you think it is under-valued, buy more. You are buying a stream of distributions. Lower prices would make it a better buy.

    If you trade, always use limit orders.

    So how does this manage to go down in a market where it seems that everything else in an energy business goes up? Dunno. If viewed as a sequence of distributions, the value of the distributions goes down as the yield on bonds (another stream of cash) goes up.

    I hope it is contra-cyclical (negative beta). That would mean it would tend to go up as other things fade. We can hope.... or sell (with a limit order). I will hold for now. Distributions have been rising. PNG has been expanding capacity. So it may work out well.

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    • I agree with the comments about MLPs being generally great long term investments. However - I have been aggressively trading MLPs since 1993, in an effort to exploit "unexplained" spikes up and down.

      Here's what I have found: virtually every thinly traded MLP I've traded (at least 50 or so) has frequent periods of unusual weakness and frequent periods of "unexplainable" strength.

      I sold PNG the first week of January at 25.25 or so, and started buying back at around 24 a couple of weeks ago. I've bought pretty aggressively over the past couple of days, and will "back up the truck" if the price goes much below 23.

      I'm betting that we'll see 24.50 or higher by late April. Could get lucky and see 25.50 or so.

      Keep this thought in mind: a typical stock broker with a position in a stock will generally hold 50,000 to 150,000 shares of a 25 dollar stock for his/her clients. If only ONE broker decides to liquidate, the price can easily fall $1.00 or so for several days and stay down til he/she has finished selling. Same thing is true in reverse.

      NEVER sell when you see this type of action. Sell when the price spikes for no apparent reason, then buy back next time you see weakness like this.

      • 1 Reply to mikesims52
      • What is not to like with PNG? The demographics are terrific and their numbers are healthy. The business is also simple and straight forward. Profit margins are good. The only question is valuation and whether they paid a good price for the recent acquisition (and future acquisitions). AGL is the best comparison but their business model has other variables to consider. Either way, I like the managment and ties to PAA (which is exceptionally well run). You also get a 6% yield at these prices. The chart doesn't look so hot but even if it goes to 20 or the high teens I would be buying hand over fist. My feeling is it will go higher perhaps to 24 - 25. This is a yield play.

 

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