PORTFOLIO BLOWOUT?
The quarter ends Friday and of course the last day for in quarter settlement is tomorrow. I have commented recently on how the MLP "tape" seems to be heavy with selling pressure and the appearence of headwind supply. Since the group has been a chronic underperformer since the July top of 340 it would make some sense to me that impatient portfolio managers may be blowing out MLPS from their portfolios. Remember that this might not have been true a few years ago but this group has been "discovered" by a lot of people including Japanese housewives doing yen carry trades instead of playing canasta. So look for opportunities here where MLPS are being thrown out at bargain prices. Also the recent moves of crude over 80 bucks might be pressuring some MLPS that are perhaps more exposed to commodity price movements. Linn Energy (LINN) is a heavy hedger.
Atlas Pipeline Partners (APL) uses hedges for natural gas which has been all over the place lately...although APL has been steadily trying to make its way back to 50.
Boardwalk Partners (BWP) is another one that just can't seem to get out of its own way. I'm not sure what the problem is over there but if the steady pressure on that one ever comes off it could rally quickly. And btw Linn Energy (LINE) has a going foward yield now of 7.6 percent or nearly 3 points above the 10 year. In the past that yield spread has been a very good place to go long.
Not the most attractive charts in the world but we've seen far worse charts then these.
This morning is news free in the group at least so far and no upgrades or downgrades from the brokerage firms. So without any catylists we'll just follow the trend and see where the open takes us. Stock futures are a little higher but nothing to write home about.
joseph cioffi's Source Page - Associated Content
4 comments:
Hi Joe -
In your post, you said:
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Also the recent moves of crude over 80 bucks might be pressuring some MLPS that are perhaps more exposed to commodity price movements. Linn Energy (LINN) is a heavy hedger.
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The pressure would be upward pressure, right? Rising commodity prics would have no impact on MLPs who hedge; the hedge protects them from downward pricing, but they will benefit from upward pricing. What am I missing?
I should have said - rising commodity prices have no NEGATIVE impact
they shouldn't have any negative impact if they are 100% hedged but sometimes i think there is a perception by some folks that it does. Also while Linn does hedge i don't know if they are 100% hedged. I recall 2 or 3 qtrs ago the hedges had an impact on earnings. I am of course theorizing here.
Joe - The main point I was trying to make is that rising commodity prices would have zero negative impact on an MLP that hedges - whether it's zero, 100% or somewhere in between.
Falling commodity prices is the event that could negatively impact concerns who do not hedge their production.
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