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Whiting USA Trust I Whiting USA Message Board

  • need_high_yield need_high_yield Dec 11, 2012 5:14 PM Flag

    Interesting Speculation

    This trust is becoming an interesting speculation to me.

    No, not because of its price to the fundamentals, that's for sure.

    But because after the Financial Cliff is settled, we may see more economic growth, higher commodity prices and more "investors" looking for yield.

    So... it might be possible to buy this before year end and get 2 or 3 healthy distributions and still be able to sell at $4.00 or more next year to those who don't understand trusts and who don't know how to do proper due diligence.

    I just don't like taking advantage of the ignorance of others to make a profit at their expense. But it is
    tempting since the distributions will APPEAR to be GREAT over the next several quarters... until they are not. :-)


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    • That was what I thought when this first crashed (down to ~$9-ish in the initial collapse). I knew the real value was still significantly lower, but expected the yield chasers would keep the price close to $10-ish for a while (like GNI which expires around the same time is still at $70). But the continual drop to a price which is probably not far off the total value of remaining distributions has been pretty relentless and surprising. Having said that, at some point it must reach a level (maybe around the current level) where remaining distributions will be as much as the current price. Meaning that even if you are wrong in your bet you won't actually lose money, other than having funds tied up for a few years. DOM is another one which has crashed far enough that it's probably also no longer greatly overvalued like it used to be and may actually pay the current price in distributions before it terminates (or more if NG rebounds a bit).
      My guess-timate is that WHX will pay out $4 or so in distributions before termination (taking into account NG hedges coming off). So even if you make a short term bet on it and are wrong, the potential maximum losses are fairly limited now. Worst case you could hold on till the end and get back most of your bet in distribution payments.