ETP began 2008 at 53.88 and as of Friday's close was at $48.09 - down 10.75%. ETE began 2008 at $35.23 and as of Friday's close was at $31.67 - down 10.11%.
As of Friday's close, the average GP in my coverage universe [of AHD AHGP BGH EPE ETE HPGP MGG NRGP NSH XTXI] was down 3.42% while the MLPs for those GPs was down 0.77%.
As of Friday's close, BGH, EPE, MGG and NSH had a worse year to date unit price performance than ETE. As of Friday's close, only MMP had under-performed ETP, but BPL, NGRY and NS were pretty close to being as bad.
If one thinks that ETE is doing significantly better than ETP, then it totally depends on WHEN one starts their comparison.
Given that since the beginning of the year, ETE's distribution is up 12.82% while ETP's distribution is up 5.30%, the fundamentals would suggest that ETE's small level of out-performance should be significantly higher.
That is what the numbers say.
But given that is sucks to loose money [even if you are not making a sale and booking those losses], I can see why anyone would be grumpy and discontent. I am grumpy and discontent.
But ETP is doing what a reasonable expectation [at the beginning of the year] would have projected they would do - growing the distribution a bit faster than 10%/annum. And as long as the distribution is growing as projected and expected, I can hold on to it.
But as long as ETP's unit price is falling, I am going to be a bit grumpy while I am holding on.
NS bought CITGO's asphalt unit - and I believe [but not certain] it is dependent on Venezuela [or CITGO] for its source post acquisition. And the market does not like a company that is dependent on that flakey dictator Chavez - or maybe the market is like me and does not like even thinking about a political risk that is hard to measure.
On the other hand, NS is cheap - and the unit price is probably over-punished - significantly over-punished. An MLP who's distribution is up over 13% over the last twelve months should not sell at a 8.73% yield. NS has a distribution/DCF ratio that suggests continued high distribution growth. The consensus DCF estimates that I produce also show good DCF growth for 2008 and 2009 - suggesting good to strong distribution growth.
Citi writes "NuStar generates 83% of its cash flow from stable midstream assets, while only 17% of the partnership' s cash flows are generated from asphalt refining. Additionally, our estimates allow for a larger than average coverage of 1.25x our 2008 distribution estimate of $3.97/unit."
Bottom line - the reward [the high yield plus projected distribution growth] more than offsets the political risk. Or at least that what my mind and the stats say. But my gut still does not like it. And there are too many stocks where my mind and my gut agree - so I am passing on NS - even thought I know I should not.
Toolatetrader asked "would not the law suite have anything to do with its poor stock price?"
But the FERC problems were announced in August [?] of last year - and I am comparing the price performance since the first of this year. An efficient market would have priced this risk into the stock before the beginning of the measurement period. But . . of course . . the market is NOT efficient.
It is the popular myth [and by myth I mean an 'explanation' more than falsehood] that there are two kinds of markets - the market of fear and the market of greed. And it is my perception that we are currently in a market of Fear, Uncertainty and Ddoubt. The FERC issues raise ETP's FUD factor. So old news is probably having a current effect on unit price appreciation.
The original question was to compare the price performance of ETP to ETE - and I had hard stats on that. Trying to pin the tale on the FERC factor in ETP's current pricing, that is a donkey of a different color - the stats are soft and fuzzy.
I show ETP's price/DCF based on 2009 consensus DCF estimates at 9.44 while the midstream sector average was at 10.53 [based on prices at close of 6-10]. ETP's LTM distribution growth has been 10.32% - which is right at sector average. The May ending five year forward CAGR estimate for ETP was 8.8 - which is a bit above average.
So I would say ETP is selling at close to a 10% discount based on those metrics [meaning the price/DCF ratio should logically be 10 and not 9]. As of close of business 6-10, ETP's unit price was down 12.79% YTD while the non-cap weight midstream [ex-shippers] MLPs in my coverage universe was down 6.23%. On any given day, a 3% difference is only noise caused by shifts in unit holder supply and demand. So that leaves the other three percentage points of under-performance due to the FERC issue. And that would make 7 percentage points [or to be consistent with the noise discount - the other four percentage points] of ETP's current under-valuation priced into ETP during 2007. Both my mind and my gut like that conclusion.
Do not let the mathematical preciseness of the above estimates fool you - I know the above contained a fair amount of BS - or we could politely call them uncertain estimates from an unqualified source.
But I am guessing that the rest of the market is making the same kind of guesstimates - and the rest of the market is equally unqualified.
In hindsight, I almost with I had not attempted to answer toolatetreader's question. But I wanted to be generous and attempt an answer. There are days when I am 'kinder' than I am wise - and this day was one of those. [grin]