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Tuesday, March 13, 2012


When one looks at charts as ugly as these 2, the first thought that comes to mind is "happy I don't own them! If you do then its followed by that sickening feeling in your stomach. The other question that really presents itself as a temptation is "do i buy em?"

Inergy LP (NRGY) was one of mlp lands solid performers. It has prided itself in increasing distributions quarter after quarter for years. Then came last quarter where we got no payout boost and we got a warning that a payout cut was coming. Based on a 16% yield here you can bet the payout gets cut in half. Inergy is suffering from pressure from propane prices and volumes which suffered from the warmer than normal winter around the US. Ferrellgas (FGP)got a downgrade of its price target from Citigroup from 16 to 9 which is inferring a distribution cut. Right now Ferrellgas yields about 12% which is also signalling a cut though perhaps not a 50% cut. Still buying these 2 mlps on the notion that the market is wrong on the distribution cut is a risky proposition. In the past the market has been pretty good at figuring out that payout cuts where imminent. And usually it is not the only one. And its not a good sign that these stocks are still making new lows. Perhaps the market is not done pricing in a payout cut. If that is the case, unless you are an out and out gambler, your better off staying away until the dust settles.

This morning stock futures are stronger by 70 dow points. Nat gas is up this morning. Crude is up as it pushes against resistance up near 110. The fed meeting today will be looked at for whatever statement changes are made. Markwest Energy (MWE) is down over 2 points this morning as it does an equity offering. No other corporate news has crossed the tape this morning.

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