Not sure what UBS' requirement is, but they all have one whether it's a 15% or 20% difference between the current price and the target price to justify a Buy rating. I would guess LNCO's price meets their hurdle while LINE is just a bit too high trading at $1.25 higher.
As a long, I would like to agree, but I think management needs to regain investor confidence by making progress with the business for the stock price to mount a sustainable increase. Until then, we just bounce around because the market seems to want 10%+ on the distribution to justify the current view of risk and uncertainty v. alternative investments.
The stock is demanding a 10% to 11% distribution rate because investors seem to require that level of return to accommodate the risk inherent in the business. Cutting the distribution simply to increase the coverage ratio would hugely increase investor perception of risk overall and may cause investors to require an even higher yield. Management needs to deliver some progress with the BRY acquisition to gain investor confidence and position them to raise the distribution in the future. If they do, the premium required will fall, perhaps to 8% to 9%, and the stock will go up into the mid-$30's or higher (with growth). I am a little apprehensive about whether they will show any real progress in the current quarter, but expect them to as the year unfolds.
This was a $400+ stock, but the fundamentals only justify perhaps $150 to $200 on the high side which just means this stock can go wherever the big boys take it and I have no conviction about the direction either way. However, it does make a lot of up and down movements most days, so it can be successfully traded long and short using momentum, overbought/oversold and price chart patterns without taking a stand on its long-term direction.
The only way for Citi to call a neutral is if they project the stock price to increase less than 15% or 20% (whatever their hurdle is for a buy). A price target of $32, plus the distribution, is a total return of 22%. IMO, their call makes no sense because you won't get to $32 with a distribution cut and, if there is no distribution cut, then, we are talking 22% upside which is a buy even by their standards (unless they simply ignore total return and focus solely on the PPS which makes no sense with a 10%+ distribution). Regardless, I still believe over the coming quarters, LINE has too many assets not to be successful finding a way to show meaningful progress and an even more stable coverage of the distribution.
Reminds me of the last tech bubble when stocks like EMC fell from $100 to $4. Once investors stop believing and returning to fundamentals, the air comes right out of these type of stocks. AMZN, FB, TWTR, and others have had a quick 15% to 20% correction, but where they go next is anybody's guess. Still, I started my first position ever in AMZN today at $329, but the technicals as I see them suggest it could still go to the mid-$290's before bouncing higher. And, if I get a bounce here, I will sell it and wait to see if it goes sub-$300.
I have never owned this stock because of the lack of profitability in relation to the valuation. I told a friend who is a big believer that AMZN will run the world one day to get out when it went over $400, but she continues to hold it. I wanted to short it at those levels, but was fully invested in other things. Nonetheless, I am starting to watch for a trade because if it falls into the $295 area, I think it could bounce pretty impressively higher (at least long enough to make a nice gain). Otherwise, I wouldn't touch it because it's totally traded on emotions and computer programs and not fundamentals.
Not yet, other than that they remain committed to 7.5% growth. However, getting better numbers out of China would be as good, or better, than stimulus and one or the other is coming. Either way, VALE will benefit and is undervalued and well-positioned with their high grade ore and low production costs.
Still holding that $12.65 trade? I don't view it as counter intuitive for a variety of reasons. First, China will either show better numbers or announce stimulus (the reason I bought again at $12.65 for a trade). Either would be a catalyst. Second, lower IO prices are not the same for all and VALE as a low cost producer and producer of higher grade ore sold at higher prices is well positioned with their lower cost structure to succeed at lower IO prices. And finally, VALE is valued much lower than it's peers with a much higher yield which I believe is because of it being a Brazilian company and not because it deserves to be so poorly valued. I will continue to hold my long position and my trade that I averaged down to $12.50 until we see the stimulus outcome and get the dividend. GLTA
Short squeeze or not, it's hard to believe the stock won't work it's way back up to where the dividend is in the 9% to 10% range. They just have too many ways with all of their assets to make progress moving forward to justify the current valuation being this low for long.
It appears the market thinks about as much of Jeffries' research as I do. While we have some resistance to get through here around $13.75, the upcoming dividend, any stimulus or better economic news out of China, and another solid quarterly report should push us higher. GLTA
I am in already in in the $28's on LNCO in my own accounts, but would consider more IF it keeps falling. I initiated a position for my mother today at $26.40 and would add to it as well. It could go lower, but barring any meaningful change in performance of the business, I suspect we are back in the $30's in a few weeks or months. Personally, when I am done buying, I won't watch it so closely other than to assess the likelihood that the distributions will continue as this is simply a monthly cash generator for me and whether it goes up or down in the interim doesn't change its role in my portfolio. GLTA
I will assume you do not have a Roth IRA and therefore it really does not matter for you that you don't understand the current law about how they work. However, you may want to get your facts straight before posting replies in the future.
Perhaps. But, wouldn't one buy more at a near 15% yield? Assuming management delivers some results, this too shall pass and those with an appetite to buy into the histeria will be dramatically rewarded and everyone else can just keep cashing those monthly checks. What concerns me more is whether our government will change the tax advantages one day. Look at Roth IRA's. The government says, "pay us your taxes now to convert to a Roth and your money can grow tax-free for your lifetime and your children's." Well, now Obama has legislation pending that would force Roth holders to start taking minimum distributions at 70 1/2 which pretty much eliminates the advantage of a Roth.
China just announced a plan to invest $168B to accelerate Urbanization. I do believe if their economy is truly slowing that we are going to hear more and more about stimulus type measures to support it. VALE should benefit from such spending it would seem.
Could very well have been shorts covering at end of day to take their gains and avoid holding over night.
Could be to some extent. Most of these large stock deals are followed by a period of selling pressure until the selling exhausts itself and the synergies are realized a quarter or two down the road. A lot of the early synergies in this deal appear to have been forfeited with the higher purchase price. Nonetheless, we are trading back at a 10%+ distribution rate and, unlike not too long ago, the distribution appears secure with the potential to be raised over time and the SEC overhang seems to have been resolved (meaning also the business model is in tact). I am willing to be patient and add on the dips.
Cramer has been all over the map. He's too emotional with his investments for my taste. He touted LINE as a very well managed business when he started buying. Now, he is selling it because he says they are poorly managed. If he makes money, he makes up reasons why he was right. And, when he loses money, he makes up reasons why it wasn't his fault. It's just how he rolls. I like the 10%+ distribution at this level and will continue to add if it goes lower. Once they start getting the BRY deal synergies figured out, the stock should do just fine.
With the distribution apparently secure, it's hard to be wrong here at these prices over time. Short-term, who knows. I picked up more LNCO today for my Roth to bring my APP below $29 and will continue to hold my long LINN position unless something fundamental changes in the outlook. GLTA
And if you go back a few years, you will see this is the fourth bottom at this level (if it proves to be a bottom). I bought today at $12.65 for another trade around my long position which is at just under $14.00. I expect either China will produce better data in the near-term or they will announce stimulus. After confirming their determination to achieve 7.5% growth this year, they aren't going to sit idly by for long.