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Energy Transfer Equity, L.P. Message Board

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  • bidwillie2 bidwillie2 Feb 20, 2009 10:28 AM Flag

    Nice raise of distribution

    What is going on with this stock? being thrown around like it has no future! Way to cheap, something wrong?

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    • "What is going on with this stock?"
      Who knows. There is so much chaos in the market now it is hard to make much sense out of a lot of things. It borders on the impossible to watch the action of one little boat when the entire ocean is in turmoil and imagine you can understand much about the big picture.

      I fundamentally think that any time the traded GP of a healthy MLP is selling for a higher yield than the MLP's yield, the market is mispricing something. There are 11 pairs of traded GPs and MLPs that I know of. For 3 of them the GP yield is higher than the MLP. ETE/ETP has the biggest difference of the three (the ratio of yields is 1.11), but MGG/MMP is close (ratio is 1.07). Some of the pairs with a distinctly less solid future the ratio is very different: for example .45 for both XTXI/XTEX and AHD/APL. But XTEX lowered their distribution each of the most recent two quarters, and the future is not solid. APL just reduced their distribution by 60% in their most recent dist. No wonder the market is less optimistic about growth for such GPs.

      ETE/ETP and MGG/MPP are in very different positions though, with solid coverage ratios and good distribution growth predicted. Wachovia's Feb '09 forecasts of the 3 year compound annual growth rate (CAGR) forecast (their estimate of the amount the distribution will increase each year on average over the next 3 years) is 7.1% for ETP and 6.1% for MMP. Those are very solid growth projections; in fact the 2 highest in the large cap universe of MLPs that Wachovia covers.

      As I said in my earlier post, with such solid predicted futures and the faster growth of the GP distribution than the MLP, it is just hard for me to fathom why the yield of some of the GPs exceeds the MLPs. Market mispricing is what I keep coming back to.

      Disclose: I have modest invests in 9 different MLPs and GPs, including ETE. I do not own MGG or MMP. I do not trade in any investment, and especially not with an MLP.

24.45+0.66(+2.77%)12:41 PMEDT