BWP

Alert: Trading MLPs, Adding Boeing, Adding Hanesbrands

by

Image Source: Ken Teegardin We’re on the move January 26 in the Dividend Growth Newsletter portfolio. By Brian Nelson, CFA Hi everyone, I hope that you are doing great! We’re on the move January 26 with three new additions to the Dividend Growth Newsletter portfolio. Many of you have read our “5 Shocking Stock Market Predictions for 2017,” and consistent with what we think may happen this year, we’re putting some cash to work. First, let’s talk Boeing (BA). We love the aerospace giant, and its recent dividend hike of 30%+ caught our attention in a big way. The company’s backlog is tremendous and its free cash flow generation is top notch. Boeing’s diversified exposure to both commercial aerospace and … Read more

MLPs: Williams’ Double Equity Raise

by

Image Source: Roy Luck By Kris Rosemann and Brian Nelson, CFA Valuentum’s opinion of the significant capital-market dependence of the master limited partner (MLP) business model has not changed, and it appears the Williams’ family, Williams Companies (WMB) Williams Partners (WPZ), has become the latest illustration of this ongoing need. We maintain our view that there will be continued challenges to the MLP structure in the coming years, particularly in the event energy resource prices start to give back some of their recent gains and/or if high-yield spreads begin to expand (making borrowing more costly, irrespective of what the 10-year Treasury does). However, with energy resource pricing improving since the doldrums of January/February and the high-yield market warming up to … Read more

Taxes and the Distressed MLP Investor

by

Image show above: Performance of the Alerian MLP ETF. “Perhaps the worst thing about MLPs is that investors can spend more time doing and thinking about tax-related items than actually evaluating the businesses of the underlying entities. This could result in poor investment decisions.” – Brian Nelson, CFA By Brian Nelson, CFA What a sensitive topic for many… Our team presented at the Chicago chapter of the American Association of Individual Investors (AAII) last weekend. It is always an honor and a privilege to have the opportunity to present to such wonderful people! They ask so many great questions. (By the way, I’m working on my schedule for 2017, so if you’d like our team to speak on a topic … Read more

Are MLP Structures Phony?

by

“What the parent has done in this example is financially engineer the future distribution stream and capital structure of a brand new distribution-paying entity with effectively no new capital or assets at all. The parent is just standing behind the subsidiary reinforcing its investment-grade borrowing capacity, which supports the distribution that supports the equity price, which provides incremental equity capital that can also be used to support the distribution and so on.” — Brian Nelson, CFA By Brian Nelson, CFA Using a hypothetical example of an MLP and its parent, let’s explain how MLP stock value can essentially be created from “nothing.” The following example is purely hypothetical and for educational purposes only. Let’s say the parent holds a pristine … Read more

Is OPEC For Real This Time?

by

By Kris Rosemann On September 28, the Organization of the Petroleum Exporting Countries (OPEC) reached an agreement to cut crude oil production levels for the first time since 2008. The cartel reportedly agreed to limit production of member nations to a range of 32.5-33 million barrels per day (bpd) while leaders met at the International Energy Forum in Algiers, Algeria. As would be expected following such news, the price of crude oil has bounced, bringing market sentiment surrounding energy-related stocks higher along with it. The proposed production could be a reduction of up to 750,000 bpd from OPEC production levels in the month of August, but how the group of nations will reach such a production cut has yet to … Read more

Distributing Truth on MLPs

by

By Kris Rosemann The recent merger break-up fiasco at Energy Transfer Equity (ETE) and Williams Companies (WMB) has put the master limited partnership (MLP) conversation back into the spotlight, after the two entities were unable to finalize a merger that had been announced in fall 2015 and would have created the largest pipeline company in the US. The deal between Energy Transfer Equity and Williams was officially terminated by Energy Transfer Equity June 29 after a court ruled that the firm was legally able to walk away from the agreement when it was unable to deliver an opinion on the tax treatment of the transaction that was required by June 28. Williams has since stated that it will seek monetary … Read more

ETE Down 70%; IBM Poor Quality, Netflix Begins to Implode

by

Shown above: Energy Transfer Equity’s recent share price performance. A lot of investors depend on us for our energy research. We’ve been busy publishing on the website, and we can’t possibly send out all of our research via email, so please come visit. Many are aware of our take in any case: the energy master limited partnership (AMLP, AMZ) isn’t going away tomorrow, but it may not last over the long haul. This is nothing new. We’ve been saying this since the peak in energy MLP share prices, which just so happened to coincide with Energy Transfer Equity’s (ETE) heights in the mid-$30s. Our readers understand that we’re taking the long view with MLPs when we talk about business models … Read more

Valuentum: Still Bullish on Kinder Morgan Since Mid-Teens

by

“Valuentum called the collapse in Kinder Morgan’s shares from $40 per share to the low-teens, and now we have called the rebound to $20 from the low-teens. Though this action may not fit into the playbook of the “buy and hold” investor, the idea of “selling” overpriced stocks that are going down and “buying” overpriced stocks that are going up is a core part of our methodology.” By Brian Nelson, CFA I’m still getting emails about how wrong we were about our calls on Kinder Morgan (KMI). Will they ever stop? We’re doing our best to relieve investors of the shackles of “buy and hold” thinking, which is separate, distinct and runs counter to investing with a focus on long-term … Read more

Recent Add Cracker Barrel Surges Ahead; BHP Cuts

by

February 23 was met with intense selling as investors digested news that the crude oil (USO) markets won’t become rational anytime soon. As we had outlined in our opening piece to the Best Ideas Newsletter a few days ago, “,” Saudi Arabia is not going to back down, and the Oil Minister of the member nation of OPEC even went so far as to say he “welcomes new additional supplies,” suggesting that the global glut of crude oil will continue for the foreseeable future. Commodity-oriented equities led the selling pressure. For those that have been reading our work for the past several months, none of this is new “news.” We’ve been warning about the risk for some time, and we … Read more