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Inergy, L.P. Message Board

marklibera 241 posts  |  Last Activity: 2 hours 21 minutes ago Member since: Aug 14, 2007
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  • Reply to

    THE REITS ARE ON THE REBOUND...!

    by staggman99 Jun 16, 2014 5:04 PM
    marklibera marklibera Jun 16, 2014 10:28 PM Flag

    stagg, past is not prologue. Since the bottom of the financial crisis when they got hit hard, most of the property REITs have had multi year gains. Last year's decline was probably just some profit-taking after some strong gains in some of the subsectors that outperformed. Wells Fargo does a comprehensive review of the different subsectors in the REIT industry, accompanied with multiple charts showing different metrics like capitalization rates and ratios of FFO to price. When I looked a couple of months ago, nearly every subsector was near pre-crisis highs in the metrics.
    The surprising decline in the 10 yr Treasury will no doubt keep real estate companies bidding up the price of real estate assets as they have access to so much liquidity that they have to do something with it, not to mention that they are typically paid based on a percentage of assets under management. But the decline in interest rates could be a sign of a slowing economy (and rising fuel prices are not going to help food prices and consumers discretionary income). Real estate firms would much rather have rising rates in a rising economic growth environment since they can hedge the cost of rising rates and lock in fixed rates and pass on the increased demand in higher rents.

  • marklibera marklibera Jun 16, 2014 4:31 PM Flag

    The WMB transaction has to be the reason for some of these moves.

  • Reply to

    OT: WMB/WPZ/Access

    by marklibera Jun 16, 2014 8:43 AM
    marklibera marklibera Jun 16, 2014 4:29 PM Flag

    WMB announced a $3 billion offering. That's a lot of shares. Will be interesting to see how the market digests this news and where it prices. Might give an (re-entry) point. Now that their strategy is clear, including the drop down of the remaining assets, and their dividend growth is spelled out, it could rise after the offering is digested. Thought I saw a target of $80.

  • Reply to

    NCT spinning off senior housing

    by bacon2bacon Jun 16, 2014 9:10 AM
    marklibera marklibera Jun 16, 2014 11:08 AM Flag

    Looks like spin-off will be a taxable event (I think NRZ was also taxable).

  • marklibera by marklibera Jun 16, 2014 8:43 AM Flag

    Big merger announcement. WMB is buying the remainder of the gp interest and lp interest in ACMP and is then proposing a merger of WPZ into ACMP. Since ACMP's distribution is lower than WPZ's, WPZ holders will either get a cash payment or more units in the combined entity. WMB also announced that it is increasing its next quarter's distribution by 32%.
    Lots of moving parts here. I own some WPZ and have been disappointed in its share price. Seems that WMB will make out with these transactions as it will get bigger.

  • I mentioned EQM about a month ago around $80. Spiking to $96 today on news about inclusion in one of the Alerian indices. Way overbought now.

  • marklibera marklibera Jun 12, 2014 5:32 PM Flag

    Gambler, you did well with ARR and anytime you earn more than the divy, it is wise to take the profit, especially with the RSI over 70. I don't know what ARR's book is or whether they were at risk of an spo. Interestingly, with the recent tensions in Iraq and spike in oil, there could be a flight to safety of Treasuries and the further risk of a slowing economy if oil continues to rise in price. I'm not sure if the mREITs would hold up if the stock market corrects, but agency MBS would seem to benefit, but maybe nonagencies don't.

  • marklibera marklibera Jun 12, 2014 5:24 PM Flag

    The hedge amounts are disclosed in the SEC reports. For Q2, they are hedging about 180 bbls. But their oil production has declined each quarter. Last quarter it was 102, down from 112 from the previous quarter. So while a rising price mitigates some of the decline in production on the unhedged volumes, on the hedge volumes they get killed because the hedge volume doesn't decline as much as their production (it actually went up from the previous quarter). Plus we also know they never get the full amount of rising prices, but their hedges are probably tied to NYMEX and won't have the subtraction of basis differentials or transportation.
    You are correct that the hedges roll off in Sept 2015, but if prices then drop, they will get burned. I doubt there's really anything to crank up in terms of production. I think it's more a case of trying to stretch out what they have over a longer period, which is not necessarily a bad thing for a current holder. Remember, CHK is getting 0 distributions on their sub units

  • Reply to

    How safe is the dividend?

    by topline1 Jun 12, 2014 11:35 AM
    marklibera marklibera Jun 12, 2014 4:42 PM Flag

    You do realize that this is an MREIT that is required to pay out 90% of its taxable earnings in order to avoid taxation at the corporate level. That being said, taxable earnings are different from GAAP quarterly earnings so don't get alarmed if it looks like they are paying more than their "earnings" in their quarterly reports. Many mREITs report "core earnings" which attempts to eliminate some of the accounting entries.
    As for the safety of the dividend, an mREIT earns a "spread" equal to the difference between what it earns on its assets and what it costs to finance them. Multiple the spread times their leverage times their book value and that gives you an idea what they are "earning" to pay the divy. The spread can change, but they also can adjust the amount of leverage that they use. mREITs that use more than 8 times leverage can be at risk of having to cut their dividends because if the price of their assets decline, their lenders issue a margin call.
    If they are providing the appropriate guidance to Wall Street, then everyone should know what their spread is, how much leverage they are using and what their book value is and there should be no surprises, even if the dividend fluctuates. mREITs get hammered when there is an unexpected decline in the dividend.
    I have owned NYMT since the last spo because it is performing. But they are investing more and more in subordinated CMBS and mezzanine loans. Those assets are hot now, but their prices can be volatile and plenty of mREITs who invested in those assets got burned during the last crisis.

  • Reply to

    need a safe 5% yielder

    by ifishnski Jun 12, 2014 12:02 PM
    marklibera marklibera Jun 12, 2014 3:04 PM Flag

    If your brother is not comfortable with the "risk" of owning a good stock with a 4-5% yield, he could consider owning a corporate bond. I just saw that Scana (SCG, a utility based in South Carolina which pays a 4% dividend) is issuing bonds with a 4.5% yield. He might also be able to buy a GNMA for 4%. If inflation spikes or interest rates go up, the market price will get hit, but he should get his principal back. Utilities and the like can be good inflation hedges as they usually can raise prices which keeps their dividend streams increasing.

  • marklibera by marklibera Jun 12, 2014 12:40 PM Flag

    In case those thought that this Trust benefits from higher oil prices, here is what the article says:

    "Unfortunately, oil prices rose, leaving the trust on the hook for millions of dollars in settlement costs. These hedges, combined with CHKR's terrible well production, mean that the trust will not capture any of the upside in oil prices until the hedges expire. CHKR is not a good candidate for investors wishing to bet on oil price increases."

  • marklibera marklibera Jun 12, 2014 11:52 AM Flag

    Grgsvll, you might recall that another poster mentioned that the Trust is basically "short" oil because of its hedges. Here are a few statements from the 10-K:

    "These derivative contracts consist of fixed-price oil swaps, in which the Trust receives a fixed price and pays a floating market price, based on NYMEX settlement prices, to the counterparty for the underlying commodity of the derivative."

    "If the floating market price exceeds the specified fixed-price, the Trust must pay the counterparty this difference in price multiplied by the volume of production hedged, even if the production attributable to the Royalty Interests is insufficient to cover the volume of production specified in the applicable derivative contracts. Accordingly, if the production attributable to the Royalty Interests is less than the volume hedged and the floating market price exceeds the specified fixed-price, the Trust will have to make payments against which it will have insufficient offsetting cash receipts from the sale of production attributable to its Royalty Interests. If these payments become too large, the Trust's liquidity and cash available for distribution may be adversely affected."

    From my reading of the above, rising oil prices are a bad thing for CHKR. Maybe retail investors who chase this yield think that rising oil prices are good, only to be disappointed each quarter when the revenues and production decline. Know what you own.

  • Reply to

    HIgher payout next period?

    by danageorge21 Jun 9, 2014 8:41 AM
    marklibera marklibera Jun 12, 2014 11:32 AM Flag

    My bad, but the main point was that the production is still expected to decline each quarter. The distribution will be lower. Not sure if this is already priced into the stock, but the robots algo traders will pick up the headline when the new lower distribution is announced and pound the stock lower.

  • Reply to

    any one selling NYMT??

    by madmax19471952 Jun 11, 2014 1:45 PM
    marklibera marklibera Jun 12, 2014 9:15 AM Flag

    Let me offer a few more thoughts. We know that a stock usually drops on the ex-date by the amount of the divy, so in NYMT's case, that will be about 27 cents. We also know that an mREIT will decline about 4% on the announcement of an spo (more if the mREIT is not very large), so that's another 32 cents or so for NYMT and we know that the mREIT model almost always leads to an spo whenever the stock is trading at a significant premium to book. So in total, we can expect NYMT to decline about 59 cents or 7% at some point in this period. Annualized,that's about 28%, which is double the current yield. Picking the exact top to sell and the exact bottom to re-enter may be difficult even if one is looking at the chart and RSI levels. But staying in the stock, when you know the probability of a decline because of the ex-div and spo is high, is not playing the odds. I'm not suggesting that every stock should be traded because there are tax consequences and a nuisance factor. But mREITs because of their large dividends and frequent spo's, tend to have more predictable fluctuations in price than other stocks.
    Investing is not just about return, but also about risk and expected return going forward.

  • Reply to

    HIgher payout next period?

    by danageorge21 Jun 9, 2014 8:41 AM
    marklibera marklibera Jun 11, 2014 2:24 PM Flag

    Sorry, but I didn't read in their disclosure that bad weather effected their production. I think the lower production was just a continuation of the the trend. Since the subordination period ends by the next distribution, you can expect a lower distribution as there will be more regular units and no subordination threshold to bolster the distribution to regular unitholders.

  • marklibera marklibera Jun 11, 2014 2:11 PM Flag

    You are not going to find it unless you look at those brokerages like Wells Fargo or Credit Suisse that follow MLPs. Wells expects CAGR distribution growth of 16% for the next 5 years, but the main driver of the stock price increase is the Lake Charles LNG terminal project. Wells expects that to add $15 to ETE's share price.
    BTW, I don't think ETE has the largest estimated distribution growth of all general partner MLPs or C-corps. TRGP and WGP have higher estimated growth rates.

  • Reply to

    Look for for CHKR

    by centurycom Jun 9, 2014 4:27 PM
    marklibera marklibera Jun 11, 2014 1:58 PM Flag

    grgsvll, as we have discussed, the continuing decline in production is exceeding any benefit gained from higher oil, NGL or gas prices, resulting in lower revenues each quarter. Also, as we have discussed, the Trust appears to have exposure with its oil hedges in that its hedge volumes exceeds the amount it produces. This has the effect that they are "short" oil, such that a rising oil price leads to impairment of the value of their hedges. Despite the higher oil prices, they have not been able to increase drilling to increase production. So despite the fact that the distribution remains at the subordination level, the fair value of the future cashflows leads to a much lower level than it is currently trading at.
    All it will take is one more Seeking Alpha article to explain this (again) and the computer programs that control "investing" or "trading" in stocks will hit "sell" and drive the price down again. Wash, rinse, repeat.
    At some point in the future, the drilling schedule will be reached, the subordination period will end and the distribution will correct lower and the stock price will have to be adjusted to account for a lower distribution.
    In the short term, the stock price can stay elevated. For example, there are a couple of trusts, one is a trust that produces iron ore pellets (GNI) and one is one of the Whiting oil trusts WHX, whose stock prices stayed above their fair value for long periods of time because of the high distributions they were paying, despite the fact that each trust had disclosed that their term was coming to an end and the sum of the remaining istributions would fall well below the then trading price. Then one day, each of these stock prices collapsed IN ONE DAY. GNI fell from 60 to 25. WHX went from $4.5 to under $2. Everyone was warned but because the drop never seemed to come, they kept holding until it happened.

  • Reply to

    market forcast

    by bayman667 Jun 10, 2014 12:02 PM
    marklibera marklibera Jun 11, 2014 10:09 AM Flag

    It's funny that everyone loved WMC when it was flying high, but now people hate it. Gracieblackbelt's comments on the WMC board are instructive. I agree they bungled their spo and their transition to a hybrid mREIT was shaky. It will be interesting to see what their dividend is this quarter. Some are expecting a large cut and some still think they will pay what they paid last quarter. The answer is probably in-between. If it exceeds expectations, the stock could get some dividend chasing into the ex-date. But we probably have to wait until they report their quarter before confidence will be regained in the stock. I'm holding through the dividend announcement.
    As for other mREITS, NYMT has had a nice run and should announce their dividend by the end of the week. I'm looking to take profits then as they are trading at a big premium to book value and an spo is most likely. If they do an spo, I am going to wait a bit before buying, as the price declined a bit after the last offering

  • Reply to

    market forcast

    by bayman667 Jun 10, 2014 12:02 PM
    marklibera marklibera Jun 10, 2014 3:36 PM Flag

    Bayman, you might want to check to see if AWLCF withholds any of their dividend. for foreign taxes. You could get the withheld amount back if you file a foreign tax credit form with your return. Remember this from the days when I owned Canroys.

  • Reply to

    Look for for CHKR

    by centurycom Jun 9, 2014 4:27 PM
    marklibera marklibera Jun 10, 2014 10:06 AM Flag

    The stock has held up well and the absence of a Seeking alpha article is noticeably. Past charts show the decline typically occurs during the third week in the Mar, June, Sept Dec, which aligns with options expirations. Maybe the algos or hedgies are propping it up to let the June puts expire before they take it down.

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