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Energy Transfer Partners, L.P. Message Board

  • inward inward Mar 16, 2010 4:04 PM Flag

    New to ETP

    I am in the process of building an income-producing portfolio. This company seems like a good one to include - strong balance sheet, good earnings, good distribution. What are the risks?

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    • I suggest that you read an article in the April 10 Wall Street Journal entitled "Big Yields, Big Risk in the Oil Patch: Master Limited Partnerships Are Luring Investors for Their Yields and Growth Potential, but Can Plunge When Rates Rise." The title pretty much explains the thrust of the article, which seems well reasoned.

    • per S&P yesterday...target $53....

      "Risks to our recommendation and target price
      include higher interest rates; a reduction in demand
      for energy commodities, thus driving
      transportation volumes lower; and, warmerthan-
      normal weather that could lead to lower
      propane and natural gas demand."

    • Please read the forward looking in the news release of the company. It is about 40 items. After reading, get a 100 proof whiskey to help you sleep.

    • I think ETP is a very solid investment. Before going much further in your DD, please become familiar with Master Limited Partnerships (ETP is one). MLPs are different than regular publicly traded stock companies (even though ETP trades on the NYSE just like a stock company). MLPs offer a significant tax postponement feature, but there are some complications you need to be aware of.

      There are some excellent "MLP 101 primers" available online at the MLP industry organization's website (The National Association of Publicly Traded Partnerships). I suggest the one from Wachovia is perhaps the best. It is really important to do some DD on MLPs before evaluating which of them is a good choice for you.

      The link to the primers is
      http://www.naptp.org/Navigation/PTP101/PTP101_Main.htm

      (just cancel any requests for IDs and passwords....the primers are in "open" space there)

      • 7 Replies to abter1
      • inward asked for new investors in ETP, what are the risks?
        Abter responded that 'ETP is a very solid investment' - which I also think is true. Abter and I are both long term buy and hold types and long term MLP investors. Half the MLP analysts are bullish on ETP. Half the MLP analysts are neutral on ETP - and I am probably listening more to them.

        There is not much expectation from any analyst that ETP will raise the distribution in less than 12 months into the future. With a 7.7% yield, analyst were anemic distribution growth projections for the sector believe that ETP unit holders, with a higher than sector average yield, are being well paid to wait for that future growth. And if one buys ETP with very conservative distribution growth expectations, then you are prepped to wait. But a heck of a lot of large capped midstream MLPs will have distribution growth in Q2-10, Q2-10, Q4-10 and Q1-11. With distribution growth should come some unit price appreciation. ETP, without distribution growth, and in a higher interest rate environment [which is a strong consensus expectation] may not have such unit price appreciation. So one of the greatest risks of a MLP newbie buying a slower growth MLP like ETP is a lack patience in waiting for the uncertain projected distribution growth.

        ETP is not a unit holder friendly MLP. It does not disclose quarterly DCF/unit numbers [DCF = distributable cash flow]. This sucks - and while ETP is slightly in the minority, ETP is not alone in this. Newbies are usually too slow to realize that earnings per unit do not matter - DCF/unit does. And once one learns that, knowing that ETP fails to disclose such a basic number, combined with the lower distribution growth, the temptation will be to sell ETP.

      • Just doubled my position. Best MLP in the business.

 
ETP
57.86+0.54(+0.94%)Jul 22 4:05 PMEDT

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