I was scratching my head a bit today over KMP, albeit I have plenty of time, but I have been concerned about rising long term rates and dropping national gas prices, but after looking at the comparative chart of KPM against UNG and TLT, I didn't really see a strong correlation.
In fact, corporate bond funds, HYG and JNK continue to trade at high levels, so MREITs investments with very high yields should continue to perform well, and I think the froth is coming off the rate move on longer term rates, particularly when you consider the ongoing issues in housing.
What I did want to focus on was UNG. Mid-stream players with commodity exposure will probably show some correlation and weakness, but I also did some charting with Line, which has both oil and gas exposure (well hedged as I understand it). KMP and EPD are pipeline companies, with very little exposure to the commodity, although there is some. I am going to look at the financials later to determine how NG prices impact upon revenues. It is more how much gas moves through the pipes. It may be less.
However, between the ex distirbution on 10/26 and last ex-distribution on 1/27, KMP rose 15%, while natural gas prices fell 32%. It just doesn't follow and KMP had a decent earnings annoucment in January.
So, for now, I am just going to chalk it up to a stock that had run up well and is now selling off a bit ahead of ex-dividend. I really believe we can hit the last ex-dividend high, and I think we will start seeing some moves in early April. I am holding Sept. calls, so I will hold on to KMP for awhile after ex if I don't get my number, particularly for the EP deal, which will result in some assets being dropped down into KMP in May, without KMP having to pay for them (at least that is what KMP is saying). Meanwhile, KMP did have to divest itself from some assets for the EP deal to go through, but it seems like a good deal from the market talk. So, hope you all do well if you are in this, but I don't see NG or rates getting in the way. In addition, the lst divdiend was $1.16 and we know they are paying out $4.98 this year as that was annoucned. So, probably looking at annnoucement of $1.17-$1.18. That is decent money and remains a good yield.
Arguably, the move won't happen until the 4/19 when the distirubtion and the earnings will be annoucnced, so I hope to see the $89 by then, but a few $ of the move did not happen last quarter until the annoucement.
WEll, both of you are making me feel good, but I liked the move today for sure. We now have two days of gains under our belts. It is only 4/2/11, so plenty of time. Last quarter though it bumped around this level for a couple of weeks, but now we are oversold. Thanks guys!
Looks like a beautiful day in your neck of the woods. Had a chance to sneak in any fishing lately? I hope so (it looks as though ROY may be taking all of us fishing on his soon to be commissioned USS BMY).
Thanks for the TA on KMP. I added again today, based on my current projections. They come in a little lower than yours, with my average target price around 88. With a current average net value of 83.62 on my May and June 80s , I'd be delighted if price reaches 88, and ecstatic if price reaches 89.77. I'm pulling for your number. If you don't mind, as we head towards X-d., many on this board would appreciate your sharing any additional TA on KMP (that you deem germane). Thanks in advance.
There is going to be a breakout to the upside very soon!! the target is the length of the flagpole in the current pennant pattern added to the breakout PPS. My calculation is as follows: from the base of the pole of $77.91 to the top of the pattern $84.71 gives us $6.80 added to the breakout estimated to be $82.97 = $89.77 target
If you look at the earnings misses, KMP has had its share of misses, some of them while I was trading. Generally, the issue is that lower earnings causes concerns about the ability of KMP to cover distributions. IN fact, any event which causes anyone to be concerned about KMP's cash flow obligations, like to KMI when it went IPO, causes problems. Lately, it was the El Paso deal and the requirement to sell three pipelines. The issues with KMP always spin around its ability to pay its distributions, yet it always increases its distributions. So, I think it is the case of KMP continuing to prove that it pays the distributions it declares. NOt much different than AGNC acutally.
I don't know who to explain KMP, but I have lost before with it, in fact twice before and it always centered on earnings misses. I think they are in a slightly different place now. So, today we see the recovery, but a slower recovery than the other MLPs. I feel like someone is playing around a little and today I felt like people were hesitating for fear of a sell off that didn't materalize. Volume was low and then it started to move higher.
So, who knows, but fundamentally, there is nothing wrong with MLP, and the MLP sector. So, we should enjoy a nice run. I guarantee I won't sell here before ex-distribution, but I am very happy to see this recovery. I think Jimmi has it right with his chart. The stock was oversold, and it was time.
So, let's all hope for the best.
Last Friday's closing candle appears to be a spinning top which confirmed a directional change from the doji on Thursday. A pennent pattern has formed and looks like a breakout is about to happen between today and Wednesday. I am going long here !
Thanks Jimi, i need all of the support I can get. I don't yet know all of the technicals and pretty much stay with RSIs and CCIs and just take a view on it, but as long as someone else can add further support to what I can already see. To be honest, I won't be playing KMP again. It looks like I will get my $87, and that will make me very happy. I just want out with my skin. I have been forced to be so patient through this one position, but just looking at the prior runs on KMP before ex and the fact the stock was so oversold before the earnings and pretty big dividend incresae, it was just set-up for a big move. It moved about $5.00 per share last quarter. However, what I can't undersand is the structure of KMP, KMR and KMI. The market cap of all three entities which all under one umbrella seems to be exactly the same as EPD, which has a lower market cap. I also was amazed the market bought the El Paso story, which involved the huge write down of significantg assets which are being dumped for replacement assets from El Paso. All I can say is get out before the ex, because these guys will be doing another offering at some point.
Also like those 14Jan 85's for 3.33, someone picked up last Thursday. There's a nice savings bond for you.
At KMP's current rate of growth(19.2%) and next years(2013) projection(9+%) the PPS should be at 107+ by 14Jan, putting a 100contract order for $33,000 @ a gross of $220,000 by then for a 667% return or an annualized 363% return.
What is strange is that every Q in 2011 missed Earning's estimates, yet did well(most) in spite of misses.
Those 13Jan72.50 Leaps can be had for about Par(83.15). Tempting...;-). Bound to be 90 B4 January, what do you think?
After reading a lot of information, I feel like these two securities simply rose faster than is normal and a lot of the commentary is centered on the higher prices that existed weeks ago now. Long rates will settle down, and I don't think they are coorelated to the movements in the prices of KMP and EPD, and I dont' think NG prices have much to do with it, for these two anyway.
Alpha is not formal or disciplined enough to be considered serious research. I am also not saying that research means everything, preferring to look at numeroius data points and information, rather than rely on one report, belief or reference point. I get free Argus and S&P reports as a Charles Schwab customer.
Almost all of the reports are more postive on EPD than KMP, but my view, the underlying reports were pretty postive about KMP too. The best report was S&P, and maybe you could argue I was wanting to read information that supported my trade, but S&P indicated a hold rating on KMP and a 12 month target of $99 and a buy rating on EPD with a 12 month target of $59. I don't see anything in the S&P reports that makes me believe that KMP will miss its consensus earnings, but history isn't kind to KMP and it has missed before. However, KMP always raises its dividend and so does EPD. EPD will be announced on or about the 12th - 13th, while KMP and its earnings will be announced on the 19th.
One thing that I have been troubled by is the possibility that NG prices will cause very poor earnings reports, but distributions, distribuable cash flow per unit, revenues are generally on the up while natural gas prices have been plummeting for about nine months now. So, most of the MLPs have been trading independingly of NG prices, but particularly KMP and EPD because they are pipeline companies. KMP ships four producuts on its pipelines, with further breakdowns within each major category. I haven't yet studied EPD.
The pipelines are having trouble dealing with the levels of volumes, primarily because of bottlenecks in various parts of the pipeline systems in the US and in Canada. While I can't fully understand it, the problem seems to be the fuels are not in the right place at the right time, but generally it sounded to me like a lot of KMP and EPD's pipes are full, which means they are getting paid and receiving revenues. That sounds pretty bullish to me, and they don't have a lot of direct exposure to commodity prices, but various articles not clear on the point.
Technically, the KMP chart isn't good, but EPD isn't that great either. I don't really feel like technicals on these high divdiend payers really tell the story, but I am going to start watching closer now to see when they turn. In this case, KMP RSI is weak, but I think it will change quickly over the next three weeks. Last quarter it made a big move up with the earnings/distribution annoucement. That move kept going after ex as well. So, I am not going to spend my time worry about charts at this point.
The put/call ratios are low for the KMP and EPD and the short interest isn't significant.
My read is that the stocks were running hot, they cooled off while energy hit a wall, and now they are positioned to move up into ex-distibution. I was very encouraged by EPD's move on Friday, and was happy that KMP manged to close at $82.75. All I can do is see how it goes tomorrow, but I think history tells us they will rise from what looks like oversold positions now.