I held my entire position and bought this morning sub-$23 for a trade and sold it at $25.75. Do you look stupid? No. Did you make money? I don't know.
Management has already said at conferences that they will meet their financial goals. So, if the current price reflects a concern over meeting the current quarter, we are in for a nice move up
I am retired and took up trading around long positions all day long to stay mentally active. I usually don't trade around LINE/LNCO because the volumes have been too low. The blessing in all of this for me has been the opportunity to trade when the stock drops in the morning and cover later in the day. Unlike 2013 which got me into these stocks at low prices realizing there were significant risks, there is no fundamental risk today. They are hedged on gas thru 2017 and 50% to 60% hedged on oil. At even $80 oil, they are now going to generate in excess of 1X their distribution cash needs by my calculations and others. So, if the shorts want to continue to hit this thing in the morning, as they have the past three, I am glad to buy LINE and LNCO when the drop looks ridiculous (as it did down 12% this morning) and trade. It's like free extra money since LINE/LNCO will be back in the $30's soon enough.
Let me assume you are serious and seriously concerned. Rest assured, the distribution is safe thru 2016 if they do nothing other than produce the oil and gas due to their hedging strategy. And, in the interim, oil prices will recover they will make accretive acquisitions. So, when you see a 12% drop like this morning from an already unreasonably low price point, buy it and either sell it later in the day or hold it, if you can. Three days in a row the shorts are piling onto LINE and LNCO in the morning and covering all day long. I won't short it, but I do buy the dips when they look ridiculous on no relevant news (and price isn't very relevant because of their hedges even if I would prefer higher prices). GLTA
Yes, but that only matters from the perspective that is makes borrowing money a better option than using units to acquire at the moment, unless what they are acquiring has also been devalued in this market.
Rather than worry about the stock price in the coming days or weeks or months, I am satisfied with the $6.52 in assured distributions thru 2016 due to their hedging strategy, the prospects that acquisitions will be made and the expectation that price fears will dissipate over time. Not planning to buy more after my recent purchases in the $25.40 to $26 range anyway. So, if it goes to the low $20's, I congratulate any and all who were able to take advantage of those prices.
Reuters article this morning (Oct 10) confirming that the first VALEMAX ship actually docked in China last week. Previously, I read that these huge ships save VALE $7 per ton. I calculate this to be an annual savings of about $1 to $1.25 billion. This assumes all iron ore is shipped to China via VALEMAX ships, the savings is $7 per ton and the tons is the percentage of total iron ore produced that has been published (though I don't remember these numbers at the moment).
If VALE can break the resistance at $11.60, then, it is likely to move rather quickly to the psychological barrier of $12.00 (why every dollar has to be resistance, I don't know, but it seems always to be), and then, the next level of resistance between $12.30 and $12.50. With the dividend upcoming, it wouldn't take much good news to get there, as shorts may not want to pay the nearly 4% dividend at these levels given the risk/reward.
Their expressed concern re: the risks of a stronger dollar should boost all commodity prices. And, it's the commodity price risk that has the stock down to levels not seen since the SEC was involved, the BRY deal was uncertain, and the payout ratio was .91X. IF we can just witness a bit of a decline in the US$, a stabilization of oil and NG prices, and the expectation of oil and gas prices reversing, then, there is no reason to remain at these stock price levels with all the favorable deals that have been done, the SEC gone, and the payout ratio solidly above 1.1X.
The Fed's expressed concern for the risks of a strong dollar in their minutes will likely positively impact all commodity prices for a while; assuming the US$ retreats as it should. And, as we know, it seems no matter what VALE does operationally right now, it trades with IO prices. Perhaps if we could get a nice run of better prices (back towards $90 with a weaker dollar and seasonal restocking), the market would recognize that VALE's increased volumes and lower costs are truly remarkable and the SP is absurdly low.
Let me give it a try. I bought more LINE today at $26 and LNCO at $25.42. I now hold more than 215K units in various accounts. Why? LINE is valued on a variety of factors. The oil and gas in the ground, as you say, has a life of many years. So, the value of that combined asset does not materially change due to short-term fluctuations in commodity prices. Also, as an MLP, investors are most interested in cash flow. With the majority of production hedged for quite awhile and the deals being made to reduce costs, cash flow should continue to improve (and maybe we will get lucky with a cold winter and higher NG prices). Finally, the business model is to make accretive acquisitions over time to increase cash flow. Interest rates are likely to remain low for quite some time, even if they rise some, and there is a very large pool of potential deals. In the meantime, so what if the stock trades at $27 or $25 or whatever for a while. From my perspective, I am happy to collect my monthly distributions operating under the belief that the paper return will be there one day as well.
Bought 25K LINE at $26 for trading account and LNCO at $25.42 (1K for mom) and $26 (9,500 for wife).....won't tell wife until above $26 though.
LINE has never cut dividend. Personally, I just bought more LNCO at $26. With most of LINE's production hedged and the deals they have completed, the dividend should be safe and these prices will look really good in the not too distant future. Besides, in 2 years, collect more than 20% in dividends and likely much higher stock price.
Unfortunately, when there is a heavily shorted stock there is also a heavy dose of negative misinformation and analyst downgrades unrelated to reality. I had to laugh this morning when I saw Renaissance (a group with absolutely zero street credibility whatsoever) downgraded VALE to sell with a $10 PT. I can only assume they have short interest and seeing the stock look like i might rebound here felt compelled to try to stop it because no one who can add would forecast a $10 PT on a company with growing volume, declining costs, declining cash needs for capital investments and what everyone is projecting of stable to modestly higher IO prices.
I have no idea the time-frame, but the massive short holdings in this stock with a negative macro (both IO prices and China growth) may hold us back for awhile. Maybe we bounce a bit, especially with any favorable election polls or result and any improvement in China or IO prices. But, to fundamentally move into the $20's and $30's will take time for VALE to grow supply, people to feel IO prices and China slowing have bottomed (if not moving up). When the shorts cover, it will be quick, whether in your timeframe, or some other.
I read 100M with 200M more to come out of the 400M remaining in China. And, there are other high-cost producers elsewhere. If you add up all of the increased production from the majors and the amount of production expected to exit, I don't see the huge surpluses that the analysts keep talking about. What I see is a company like VALE with 50% higher volume in 3 years, with significantly lower costs, reduced capital investment and perhaps even higher prices. While the near-term is uncertain, the future looks pretty good to me.
VALE has traded entirely on the election and IO prices of late, but they seem to be doing some really great things internally. For one, they just inked a couple of deals in anticipation of China re-allowing VALEMAX ships into ports. Does anyone know the value of this to VALE? I tried to calculate it based on percent of business going to China and saving $7 per metric ton on shipping and came up with more than $1B (about $1.25B actually), but I don't know that I am considering all the relevant facts that would go into calculating it. If VALE has stated the value, I don't recall. Anyone know?