I notice in 2010 when Brent was $75 and NG bouncing between $3.80 and $5.00 that LINE was steady at $25 and paying a $2.55 distribution quarterly. Any thoughts on why with Brent at $90 (20% higher), NG at $3.86, LINE's hedging situation, and a $2.90 distribution that LINE wouldn't be trading significantly higher, other than current market panic re: energy names in general due to the uncertainty of where oil prices may land?
Three days in a row a combination of shorts and panic has driven the stock down in the morning with opportunists and short-covering taking it back up the balance of the day until the traders close out their long positions late in the day. I have enjoyed the trade (historically hard to do with LINE due to lack of volume), but it sure is unpleasant to watch my long positions lose so much value so quickly on paper.
Yes. You are correct and it was obvious by looking at the chart, so why I bought it at $575 in hindsight I just don't know. Earnings should get it moving back up on the 16th. Maybe we will even get a run into earnings after it hits $550.
I disagree that it has little impact on VALE. Right now, major investors shun anything Brazilian because of Rousseff. With a new, business friendly government, investment would enter Brazil and companies, like VALE, would return to being valued on par with non-Brazilian businesses which alone would be good for a 30% increase in the stock.
Fundamentally, the big three are moving the iron ore mining business into an oligopoly and oligopolies have much higher profitability. Personally, this is why I am buying and keep buying VALE and will hold it while the oligopoly is formed because in time this stock is much, much higher than this insanely undervalued situation it is in now.
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.