Actually, I have no idea what will happen tomorrow on the news. I suspect it will be up, but whether more or less than it is trading after hours, who knows. For example, there are likely still BRY shareholders wanting to capitalize on any news to get out of stock. Regardless, I think LINE with a truly, widely agreed upon, secure distribution could trade at an 8% to 9% distribution rate, or $32.25 to $36.25 in the coming months.
Well, not everyone got it because Kaiser at Hedgeye was telling their customers (if they actually have any) to sell or short the stock because it was heading to the low $20's.
I'm on your side, but I don't think any respectable hedge fund was shorting LINE with a 10% distribution and a "known" impending catalyst (this deal, and perhaps now a second one). Obviously, there are shares short and people are responsible for them, but I would be shocked if they are truly professional investors. Most likely, folks like those who listen to Kaiser at Hedgeye (which makes them unprofessional investors to begin with).
I will leave it up to people who better understand this market to assess your math, but my understanding is that another benefit of the deal will be lower (or reallocated to other opportunities) operating costs from not having to develop the Permian assets. So, whatever the math on the production, the lower investment requirements need to be added on.
No surprise here. They said this is what they wanted to do and the environment was ripe to get it done. I am interested in better understanding the economics, but on the surface, if it is accretive to cash v. without the deal, it is beneficial. Hope they keep trading halted until the market opens in the morning so there can't be any silliness on low volume. More secure distribution should mean a nice pop in stock in time. GLTA
I suspect MLP's will be a slave to the Fed policy re: rates. Higher rates limit the ability to make accretive acquisitions and that is likely what we saw today. Still, LINE/LNCO remain undervalued relative to their assets and their ability to monetize these assets and the distribution appears safe, so I would not sell here either.
Not that they aren't out there, but what fool would short a stock with a known impending catalyst (the Permian asset swap) on the horizon and a 10% monthly distribution? If they short and wake up to find the announcement of an accretive swap deal, they will be covering their position above $30.
The stock will be north of $30 when they announce the Permian asset swap in the coming weeks or months and anything the stock does in the meantime will not really matter, unless it falls far enough to create a no-brainer buy opportunity. I have all of the LINE/LNCO I want, but at the right price, I would buy more and collect the incremental distribution while waiting for the Permian deal. There is always the potential they could do some other accretive deal along the way as well.
So long as you believe the distribution is secure and the Permian assets will be traded or sold (an announcement that should have a positive impact on the stock price and perhaps the distribution rate), then, any of these prices associated with a 10%+ distribution are good prices to buy IMO. That said, I have plenty of LINE and LNCO to satisfy me and just enjoy the distributions every month without much concern one way or the other where the price of the stock goes, so long as the fundamentals remain favorable (as they do currently IMO).
I do hope you are joking. NO analyst in their right mind would get caught dead citing SA articles in their research. They would get laughed out of the fraternity.
Kaiser is a mere child working for a fifth class fund that can't afford an experienced analyst. Now that everyone knows it, I doubt we will see any relationship between Kaiser tweets and LINE/LNCO stock price.
I never let myself get married to any investment and appreciate hearing the bear case for a long position and the bullish case for a short. However, I do get tired of hearing the amateurish ramblings of incompetence by Kaiser at Hedgeye and the ghost writers they encourage. At the same time, I owe them a debt of gratitude for having helped in the past allow me to get into LINE at lower prices. I have little confidence they can help me add to my position at lower prices because I think their 15 minutes of fame has expired. BTW, Apple is borrowing money to pay for their dividend and stock buyback. It's really no different. Sure, Apple has cash flow and money overseas that they don't want to repatriate for tax purposes. But, LINE has assets in the ground that they can swap or sell to achieve the same purpose. Kaiser needs to get some business experience and learn how to evaluate a balance sheet.
I admit not to reading the article because I wouldn't want to participate in funding such silliness. Yet, it's amazing how media can make things seem more than they are. Hedgeye is an irrelevant fund with a child as analyst in the energy sector because they can't afford an analyst with experience. I kinda get a kick out of the amateurish attempts they make for no other reason than to try to make a name for themselves and attract paying clients. Yet, if by some miracle after they have proven themselves entirely incompetent to date, if the stock goes down significantly because of any such an attack, I would comfortably add to my more than 160,000 unit position and thank them very kindly.
Jump on in, the water's fine. It's a very reasonable valuation with minimal downside risk as the 10% level of distribution probably puts a floor in the stock. Also, you have the near-term catalyst of a Permian transaction and a 10% tax-deferred distribution paid monthly. The business model remains intact, even if it didn't work out as well on the BRY deal as hoped. I certainly wouldn't miss the next distribution or the Permian deal "hoping" to see $27.99.
VALE is materially undervalued by any measure, but it has been stuck in a $12.50 to $15.00+ trading range for a while now. In my view, that makes it a perfect candidate to be overweight in with the extra weight in a trading position every time if falls and trading out of it every time it gets to $15+ while you wait for the core position to eventually get where it belongs which is something in the $20's IMO. Currently, I am still holding my 200,000 shares at about $14 for my core long position (held through 3 dividends, so it has actually paid the dividend) and my current trade is 85,000 shares at an average price of $13.45. It would be nice to catch a break with the Australian workers going on strike and helping support iron ore prices while nickel prices soar, but all in good time with our without a break. VALE management is doing all the right things and will ultimately be rewarded.
I think there are a lot of people, including many who manage a lot of other people's money, who really have no clue what they are doing. IMO, the only thing to do with LINE/LNCO is to go long and collect the distributions with the expectation that the stock will also appreciate over time. Or, just go elsewhere if tax deferred income is not your thing. However, the near-term potential for a major asset trade or sale that would be an upside catalyst for the stock would take shorting off the table for me. I did short Amazon at $400 and Twitter at $70 though. With those low hanging fruit, why anyone would spend their day shorting this is beyond comprehension to me. But, I get back to their are a lot of people managing a lot of money who have no earthly idea what they are doing.
You could be right. I have traded that range 3 times now while I hold my core position at $14.00. Between trading and 3 rounds of dividends, I have made good money in this stock and believe it will be $20+ in the coming year or two. However, I put on a $13.55 trade the other day and added to it at $13.35 today. While it could retrace to $12.50, I think $13.00 may have been the floor the other day and playing for a return towards $15 without falling to $12.50. Rising nickel prices, better than expected China data and any sign of a reversal in iron ore prices would make for a nice run here. Management is doing everything right and getting no credit for it to date. How Rio Tinto gets a higher valuation is amazing to me. GLTA