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Enterprise Products Partners L.P. Message Board

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  • factoids2002 factoids2002 Oct 11, 2010 4:47 PM Flag

    take some profits

    Raman_ds wrote: "This stocks has had huge run, it will be range bound for next 2-3 months. Best MLP. but take some off!!"

    EPD is up 30.40% year to data while the ^AMZ is up 21.58%. Should one take some off the table? Raman_ds say to do so. But such a statement would imply that EPD was correctly valued at the start of this 'run'. Raman_ds failed to mention any valuation metrics. If one is going to suggest selling, then one should include some metrics on valuation in that argument.

    Bhenning32 writes that he/she agrees - but also fails to talk about valuations. Why?

    Raman_ds wrote: "I would re-invest in under-performing but good MLPs like ETP. [ETP has] a 7.3% [yield]. At some point, it will catch up with EPD.

    Raman_ds appears to have no idea why ETP has under performed - and it appears that he/she believes ETP to be equally as good as EPD. It makes me wonder if Raman_ds has looked at the two different histories of DCF/unit and Distribution/unit numbers - or even looked at the distribution/DCF ratios [which are a leading indicator of future distribution growth.

    Jjtbcm@sbcglobal... writes "There's nothing wrong with keeping SOME powder dry." But where is the justification for using one's investment in EPD to create such dry powder.

    Of the large cap midstream MLPs [BPL, BWP, EEP, EPD, ETP, KMP, MMP, MMP, NS, OKS, PAA, SXL and WPZ], there are six with yields between 5.50% and 6.00% [BPL, EPD, MMP, OKS, PAA, and SXL]. Only SXL has better distribution growth. With KMP having a yield of 6.20% and EPD having a yield of 5.62%, that 58 bps difference in spread might tempt some uninformed investors. But over the last twelve months, KMP has grown its distribution 3.81% while EPD has grown the distribution 5.50%. KMP is paying out 98% of its DCF/unit in distributions, while EPD is paying out only 79.86% [and that is based on the 2010 DCF estimates that I am using]. So it is logical to expect better distribution growth going forward for EPD [but these are pre merger stats - and there will be short term dilution from that event - even if the down side of the short term will be out-weighted by long term weighted average cost of capital improvements].

    What's my point? The point is - stop treating a Yahoo message post like a 'twitter event' that is best expressing using the fewest amount of characters possible. If you are going to post an argument, put some facts and metrics behind them. Provide some evidence that you have done some due diligence. Otherwise, you are not helping other investors. If the goal of your messages was to help, then I believe you have failed to do so. If the goal was the share opinions, then you have failed to share enough facts to justify those opinions. I would request that you do better than this in the future.

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    • Some people obviously do not take well when presented with facts! EPD has indeed had a big run up and for good reasons including as Factoids said a large increase in DCF and the big move of money into MLPs. ETP on the other hand had had some significant growing problems.

      Take money off the table. Right now I would not because EPD will announce excellent earning tomorrow - processing margins can be generally figured using the price for NGLs - have been on the high side of historical norms and EPD is likely to rise accordingly. EPD also has now integrated some $1B additional properties in the trailing quarter. Last, while interest rates will eventually rise making a headwind, there is continued downward pressure creating upward movement in the next 6 months at least from people searching for yield.


    • I look at continuing news events like today's two big joint venture announcements in Eagle Ford (Statoil/Talisman and CNOOC/Chesapeake) and remind everyone that EPD and NGLS stand to benefit the most from Eagle Ford since these two foreign companies are looking to a future of liquified natural gas coming from their JV interests in Eagle Ford, arriving in the gulf for loading in liquid form onto ships.

      The smart money are the Statoils and CNOOCs of the world. It looks by all appearances they are overpaying for Eagle Ford access but in the long term these two companies have shown themselves to be very smart long term investors in the future. And the future is clearly liquified nat gas being loaded onto ships in the gulf. If you accept that thesis then you start to realize why EPD and NGLS and other MLPs with Eagle Ford and gulf access/exposure can be long term winners that cause one to disregard the call to simply sell based upon near term run ups.

      The reasons some MLPs keep hitting new 52 week highs are not simply driven by yield seekers IMO. I think there is some significant long term positioning based upon news events just like today's two big JV announcements.

      • 1 Reply to ferdiefor
      • a couple of other reason to continue to own EPD (and other mlp's) are illustrated by the just released minutes of the latest FOMC meeting.

        Number one is a continuation of ZIRP as illustrated by this:

        "...Nearly all members agreed that the statement should reiterate the expectation that economic conditions were likely to warrant exceptionally low levels of the federal funds rate for an extended period."

        And number 2 is the upcoming QE2 and the further erosion of the US dollar, which will drive up asset prices - especially those to do with commodities:

        "...Many participants noted that if economic growth remained too slow to make satisfactory progress toward reducing the unemployment rate or if inflation continued to come in below levels consistent with the FOMC's dual mandate, it would be appropriate to provide additional monetary policy accommodation. However, others thought that additional accommodation would be warranted only if the outlook worsened and the odds of deflation increased materially. Meeting participants discussed several possible approaches to providing additional accommodation but focused primarily on further purchases of longer-term Treasury securities and on possible steps to affect inflation expectations. "

        I, for one, think that EPD is NOT going down anytime soon by any large percentage. Sure, there could be a dip or two, but I don't see a large correction coming for a while. Too many things are working against a large pullback.

    • Factoids,

      I do respect your view on the DCF to distribution ratio. I am a great fan.

      The high payout for KMP was, until today, playing as a lid for KMP relative to EPD. However, today KMP showed some real strength. The GP issue is also very much at the heart of KMP not quite surging this quarter. AGain, it showed it's strength today.

      I trade these, and I can't find two l like better. So, KMP will advance up about $1 from here, maybe more and EPD will probably rise another $1 to $2 and the earnings relese shoudl be tomorrow morning for EPD.

      So, I think you have a very good point and I have traded a bunch of different MLP's this quarter to find out which one has the power to give me a real ride on the calls. So, far KMP is the winner as I bought a bunch of calls when it was $66.40.

      However, I am up on both Nov. calls on EPD and KMP. We are neck and neck today and the race really starts tomorrow for EPD and next Monday for KMP.

      So, good work, but don't get to hung up that others don't necessarily trade by your metrics. If that were the case, KMP would not have performed so well and that just isn't the case.

      The market is telling you the metrics are somewhat true, but also the stock is performing well. YOu need to diversity your holdings. HOwever, I just don't know how to be long a stock or security, as I just trade.

    • I agree with your dissertation for the most part. I only add these observations to the fire. First KMP has had a wealth of analysts,article writers,Cramer etc recommending it. Another added fact is that oil is at 81-82 which makes EPD the model for midstream mlp's a better buy from now on. Also the 2+ billion funds being added to mlp's, usually ends up in high capitalized stocks. So while facts may be important you have exogenous cross currents taking place ,and in this case very positive for most mlp's now especially midstream and oil associated These are not usual times of last 10 years.I suggest mlp.s are being looked at as a sector niche,added to almost zero interest cd's etc so let everybody have a ride on their "found" mlp's.

      • 1 Reply to nymarv10956
      • The bigger question will be whether MLPs can achieve that which reits have achieved and perhaps do not deserve at this point. Reits were forced to raise billions to shore up overlevered balance sheets; a few MLPs were forced to do so but many MLPs came thru the credit crisis OK. A lot of reits were forced to cut, eliminate or go to the 10/90 cash/stock dividend because they messed up their balance sheets so much. Few MLPs were forced to cut or eliminate. And yet reit valuations are IMO crazy right now. More importantly, their yields suck for the risk of ownership. If you looked at reit yields it seems to me MLP yields should be much lower since they were much better allocators of debt and equity in the last cycle.

        So my question is whether MLPs will receive their just due from investors or will investors continue to chase reits into underlying property valuations that make zero sense IMO.

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