Sarge, on KMI, go to the 1 yr chart and find the prices on Sept 2013 and draw a line straight across. Support there could be around $31.5, but it also could revisit the March 2014 bottom at $29.
The way I look at it (which could be completely wrong) is that when you have a plunging stock, let the stock tell you that it has reached a bottom and has stopped going down. Many times you see these stair step patterns down where the stock will bounce up to the next stair and then continue down. Many stocks have that pattern now.
Frankly the whole energy sector is broken and as long as people keep talking about it, that means there are still plenty of people to capitulate, meaning lower lows to come. Maybe when Time magazine (is that still published?) puts a "Death of Oil" on its front cover, we will know it is time to buy.
The argument is not about maintaining the stock price. The argument is about maintaining the solvency of the company and/or creating a buyable bottom in the stock price so that one can get even on underwater shares. There is no buyable bottom at this price because the only thing that is going to stop the price from going down (as long as oil keeps going down) is for the company to buy back units, but it makes no sense to pay a distribution and buy back units.
As for the geniuses running the company, Walker bought shares at $22. These guys have all the research about oil and gas supply and demand, yet they didn't hedge out long enough. Haven't they heard about the Marcellus and all the gas coming out of there? They fired the acquisitions guy and one guy moved on, so clearly they weren't pleased with some of the exec performances.
Gambler, it's sad, but my best trades this year have been when I decided to sell things as they started to turn south, thereby avoiding much worse losses. Stuff that I held has done worse. Sometimes your best loss is your first loss.
Still trying to catch up, but it looks like the market responded well to GLOP's report, however the stock looks like it hit resistant. After a bounce like it just had, it's normal for there to be a selloff, but I'm watching this closely as the ex-date is this week (the 6th?). It should be running up into that ex-date.
I know they had a good report and raised the divy guidance, but the market doesn't seem to care about that and when the ex-date passes, there won't be anything to hold up the stock.
I could be wrong, but sometimes the market gives you a chance to take an exit even if the exit is for a loss.
Stagg, you could be correct about China and India, but taking a page out of DH's book, you don't really know who put that story out. It could be a pr agency hired by the coal companies to help prop up their falling stocks. Many times the market just cares about perception and the current perception is that coal is dead (or in the process of dying). But that's how opportunities are created (but you may be very early on catching a rebound in coal).
As for the party being over for energy MLPs, you may be right for the upstream MLPs, but the model still works for midstream and there still are a bunch of projects to build. But like most things, the midstream MLPs got too popular and too expensive, and some have too much debt (but not all). Continued selling by ETFs may drive down their prices, but just like your argument for coal, that will create opportunities.
I've been out of pocket the last few days. Saw the big miss by WMC. Glad I sold when I did. I think there are a few thoughts here. First, these mREITs can be difficult to analyze because of all the moving parts, which is why it is sometimes better to trade them instead of just holding them. We are just not going to see the book value gains that we did a few years back when MBS prices were increasing as the Fed bought every bond available. Second, it appears that WMC is finally starting to come back to the pack in terms of its dividend amount (not the yield). Gracieblackbelt from the WMC board (who used to work at WMC) fears that the dividend could shrink to 50 cents. That's still a great yield on a $13-14 stock, but the market tends to view shrinking yields as a disappointment (especially when coupled with a declining book value). So there is risk the stock will get hit if the dividend disappoints. The stock is sitting on the 200 dma after briefly piercing it. There is support at $13. If we get a strong employment number, rates could rise and mREITs could sell off again. I would wait before re-entering as the next divy announcement is not until mid Sept.
WMC was fun while it lasted, but we have seen it countless times in the market that all good things do come to an end.
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.