Stagg, it's funny, but I was looking at ARLP and its gp, AHGP's reports today. While their stocks are down, they both managed to increase their distributions. AHGP is now yielding 10% which is absurd for a gp of an MLP. The financial metrics are not bad for ARLP with debt and DCF coverage all within comfortable ranges. They did mention that their competitors are straining -- I think a number of them are trading under $1 and on their way to bankruptcy. It is very possible that ARLP could be a survivor in a damaged sector, but it is also possible that the bad color of the sector could continue to weigh on the stock price.
In cases like this, it is best to let the charts tell you when things may have bottomed out. You have to go back quite a ways to see some support around $16. It might be best to wait until the bankruptcies of their competitors has a chance to wash through. good luck.
My take is that corporate raiders like Icahn like to buy stocks of companies where they can cut costs and sell underperforming units, do spin outs etc, to bring out a better sum of parts. Even though some mREITs are selling a good % below book, as soon as it was announced that an Icahn bought into one of these stocks, the discount would be erased significantly. Most mREITs are not big caps, so there isn't much liquidity for a raider to amass a stake without moving the price.
That's incorrect. They have $75mm, less than $2 per share. Still better than nothing. They used the UEO proceeds to pay down their credit line to zero.
Not necessarily to buy, but to see if they hold up. If any sector has led this market, it has been biotechs by far. The index, IBB, has fallen about 6% in the last week and is sitting just above its 50dma at 374 (the 50 dma is at 372). It looked like IBB traded below the 50 dma earlier today, so that fact that it held is good news.
Biotechs have had similar swings this year and they have held. 360 looks like support if the 50 dma gives way. In previous declines below the 50 dma in May, other support levels held.
Stagg, I think we could still get a late summer rally (we still have all of August and some September's have been good). That's why we have to try to make sense of the technical factors, although one can't really know what is going on in China and with all of the ETF funds selling.
kbon, a good topic, probably for its own post. In general, high yield stocks have somewhat more risk for short raids because the companies generally pay out a large part of their cashflow as dividends and also fund their businesses with large amounts of credit, so they don't have a lot of cash to buy back large amounts of stock. They also have lots of retail investors to get spooked either with panic or stop losses. Further, as a high yield stock declines, that makes it more expensive to fund acquisitions since most high yield companies use a combo of debt and equity. Many of the high yield companies are dependent on acquiring new assets (or in the case of e&p firms) replacing reserves, so they need to be able to borrow and issue equity to keep the treadmill running.
Traditionally, tax loss selling season starts in November so that investors can repurchase the stock after the expiration of the 31 day period that would disallow the tax loss if one repurchased the asset. In other words, if one was interested in repurchasing a stock after you booked a tax loss, you could wait as late as late November to sell and then repurchase at the end of December. Because everyone knows this, they try to sell earlier than late November to beat the crowd of sellers pushing down the price. In addition, institutional holders usually close their books by mid-Dec, so the amount of sellers should end by mid-Dec.
Drawing with a crayon, the first support level is S&P 2040. If that doesn't hold, 1975ish comes into play. If we ever got there, the market surely would be in oversold territory. RSI is only 39 now, so I guess it depends on how fast the trip down is -- the faster it is, the more likely we hit oversold conditions.
Bloomberg mentioned this morning that more than 100% of the S&P's rise this year was due to 2 sectors -- healthcare and retail.
pyro, actually rising rates were theoretically supposed to help BDCs as it would increase the revenue on the loans that they made, while many of them have fixed rate debt.
But I think the selloff was a case that so many retail investors were playing BDCs as a search for yield, having switched out of mREITs, REITs and lately MLPs. Whenever too many people are on one side of the boat playing a popular instrument, you know there's nobody left to buy.
There were early stories about those BDCs with too high energy concentrations in their portfolios, but that can't explain punishing all BDCs. But the energy carnage spilled over into all high-yield debt, so it double-punished the BDCs as holders of high yield debt loans and as issuers of high yield debt. Throw in some leveraged ETFs and you have all the makings for a wave to the boat over.
In short, it's just like anything else in investing.. When some sector gets too popular, chances are it's going to sell off at some point.
Well, no doubt there's been plenty of stories about leveraged funds liquidating MLPs, but the price of oil has also rolled over. EVEP doesn't have as much to worry about a borrowing base redetermination since they have nothing drawn on their credit line, but in October, other e&p's will have borrowing base redeterminations which might lead to more distribution cuts and asset sales. So the whole sector could get pulled down again and even if EVEP is in better shape at least debt-wise (we know their hedges are not as good as others) they may still get dragged down with the others.
So the question is, do you just sell the bounces?
For June production payable in August.. But as someone pointed out, when they last cut, they announced it with the earnings release in March.
Of course, I remember that post Huff. I thought you were being snide because I've been roughing up your boy. My apologies if I misread your meaning.
clrodrick, I think most of us are like a deer in the headlights with GLOP. Looking at the chart, it isn't even oversold yet with the RSI at 32, so it could get worse. But it reports earnings on Thursday before the open. It also might run up into the ex-div date in August. I think I am going to try to wait for a bounce but it has to clear $21 and then $22 on retests to warrant holding any longer. If I it makes it back to $23, I would be gone.
Sarge, the decline in MLPs may be nearing an end for now. Some of mine actually bounced a bit today. I assume that this means that it will end with other sectors too, but since it started with MLPs and energy maybe the others still have a way to go. Read that biotechs were down today. If that's the case, I'm selling my wife's biotech fund on Monday. No sense in letting the selling in that get going. good luck as we try to navigate this market.
I understand the thrill of buying for a dead cat bounce, but where's the value? They have no distribution so you are not getting paid to wait. Cooperman could get a margin call (if he hasn't already) and have to liquidate. Since ATLS is the gp of ARP, if they cut the distribution at ARP, they will be cutting their own throat, so maybe that doesn't happen, but maybe it should to save ARP. They have a debt payment due in August. I think it's good money after bad.
Insider buying is not a good reason to buy a stock. There are a host of companies whose CEOs bought big amounts (look up Friedrickson from SDRL and Walker from EVEP and many more) and they were dead wrong. Some think that the CEO's know the company best, but what they don't know is the perception of the stock by those doing the trading. Plus can one person fight off all of the computer algo traders and hedge funds. I'm stuck in this so I really hope they have a good report and the stock bounces, but all that overhead is going to be big resistance for the stock to move up. And then come November, this is going to be a big tax-loss selling candidate. Look to bail out before the tax loss selling kicks in. You can always buy back in December when it abates.
And you forgot to add after projecting that they were gong to pay $1.35 (when the deal with TRGP was first announced) and then cutting to $1.10, and then doing a reverse split and then suspending the first quarter distribution and saying they would pay in the second quarter. You think Wall Street sees a pattern?
Bob, the discussion about the market is worth having, despite the animosity between the posters. I look forward to your admonition of Huff now that he has decided to gang up on me.