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Ferrellgas Partners LP Message Board

  • infinitidrivr infinitidrivr Nov 12, 2012 12:55 PM Flag

    The old American Dream vs. the New

    We used to believe in the magic of compounding over the long term. Currently, FGP yields 12.5% and will in all likelihood pay same dividend or more for the next 18 years because propane possesses valuable properties and there are now only two major national distribitors of this commodity. And don't overlook the potential for vertical as well as horizontal integration of this valuable franchise. If one bought the US stock market over the last 15 years, you've earned 2% per year before taxes and inflation. FGP is a good steady choice for an income portfolio that will compound. When capital has been needed, FGP has proven time and time again of its availability.

    The new American dream is to get on message boards and spread fear, short the shares and hope to make the big bucks. Good luck Bonk because with the casino you're on, you will need it..

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    • I agree and that's what I've needed in my portfolio

      Sentiment: Buy

    • To quote a brilliant investor (David Einhorn):

      "I am not critical of the company becuase I am short, I am short because I am critical of the company. "

      IMHO soothsayers such as yourself are far more dangerous as you offer little in the way of analysis and lull potential bagholders into a false sense of security. Platitudes and throwaway comments on "vertical integration" do little to address the valuation and the cold hard mathematical fact that year in and year out FGP has borrowed more and more to meet that distribution. Please dispute that basic fact if you can.

      IMHO people should do their own work. I am crystal clear in my logic and reasoning and people can decide to agree or disagree, but if they do form an opinion they should do the analysis to back it up.

      If you want a parallel just look at Superior Plus (same business as FGP) from Feb 2011 to Dec 2011. Unsustainable yield (paying out $1.60 per share), trading at 11-12x EBITDA, hit the debt wall. Cut distribution a little bit at first to $1.20 rate so stock only tanks 10%. A few months roll on and it becomes clear they were in denial and that cut wasn't enough. So the finally cut the distribution to something more sustainable, a $0.60 rate, and the stock collapses from $11 to $5.50.

      FGP is in far worse shape IMHO. The debt is way higher (at 6-7X EBITDA vs about 5X in Superior's case), the overall valuation is higher (15x vs 12x), and the denial is even higher amongst the "I always gots me $2.00" bagholders.

      I expect a similar pattern here - a small cut at first, say to $1.50, allowing bags to say "$1.50 is still pretty good these days!" followed by a huge cut or suspension later that should send the stock into the mid single digits (all IMHO).

      Steve Wambold's $2.4 Million pay package and VanWinkle's $1.4M package lead me to believe they are the ones living the "American Dream" you are beaking off about.

      Shareholders of STSI are wishing they took my comments to heart back in September today. As are the ATPG shareholders who I warned about the debt situation well over a year ago. Just look up my posts.

      And of course don't take anything I say or my opinions for granted - always do your own work.

      Sentiment: Strong Sell

9.95-0.05(-0.50%)Oct 26 4:02 PMEDT