APU Cramer just wrote an article to buy it on real Money his sub site
Get Into Linn and AmeriGas
| Jan 28, 2014 | 11:14 AM EST |
Just go buy Linn Energy (LINE) and AmeriGas Partners (APU)? What else can I say? We have had endless cold days here in the U.S, and the big rap against Linn was that it had too much natural gas and not enough oil. Suddenly, with the Berry Petroleum buyout, it has both. The big rap against AmeriGas was it had too much propane.
Now we are scrambling for natural gas, and there is a 33-state shortage of propane, with lots of contracts up that will be let at very good prices.
Sure, you can buy Devon Energy (DVN), as this company never lost its natural gas roots. You can pick up Range Resources (RRC) and Cabot (CBT) and EQT (EQT). They all make sense. But the issue with all of them is dividend yield: They don't have it.
I like Linn and I like AmeriGas, the latter having been knocked down by a recent secondary offering by holder Energy Transfer Partners (ETP).
Why AmeriGas? Because it yields at almost 8% and it is the pure play.
Cramer just states the obvious on the recent cold spells which will affect the 3/31 quarter.
What Cramer does not state is corn farmers created a localized shortage in the quarter ending 12/31 drying out soggy corn. Plus, November was the coldest in about 11 years and December the coldest in (from dimming memory) somewhere around 8 years.
In short APU delivered a record amount of propane last Q and will break that record this Q. When supplies are tight margins improve as competition gets less cutthroat when dealers are delivering all they can. Increased deliveries are likely to spill over into 3Q (ending 6/30) if shortages continue because partial fills during scarcity will be topped off when demand drops with warmer weather.
We have at least two quarters of great earnings coming. Stock price still hasn't recovered from ETP offering which did not increase units outstanding. I also own ETP. They have a big tax gain embedded in the APU units. Even though they could have sold all when the lockup ended, they are spreading the tax impact over several years so they can offset the recognized gain with operating tax shelters like depreciation. I doubt they will sell any more this tax year.