Author Topic: Energy Sector  (Read 56943 times)

Gregmal

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Re: Energy Sector
« Reply #20 on: February 01, 2020, 11:29:20 AM »
I dont buy Cramer's argument. It is valid, but meaningless IMO. Wall Street is filled with money obsessed whores. Add to the list the plethora of underperforming hedge funds and money managers who preach a "value investing" style. If there's money to be made in energy, they'll go there. Just look at the activity on sites like this with the tobacco stocks and lately even stuff like XOM.

While its admirable on the surface(but also more a manipulative look at me Im woke or whatever move by the pension funds and such) it won't hold. If its green, buyers will go there. If, over the long run, pension fund managers underperform they'll face pressure and ultimately start letting the things that matter dictate their investments. Its just easy right now when you can buy Tesla and claim to be a socially responsible fund.


rb

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Re: Energy Sector
« Reply #21 on: February 01, 2020, 04:43:54 PM »
Yeah, I think that Cramer's wrong on all counts (as usual?). He's mainly talking about E&P majours being cheap and making this bizarre, no testable thesis about snowflakiness of wall street types (really?) that's affecting the sector.

Well I've looked quite a bit lately at the sector and I don't buy it. Yes, the E&P majours have made great strides in financial discipline. They actually have real free cash flow now. All the money isn't going "back into the ground anymore". Koodos for them. But by any normal company standard they're not anywhere close to a bargain. Let's not forget that what we're talking here is really a commodity - so supply and demand dominates. The demand, while a tad weaker has been there. Yea you can talk about Tesla and the electric revolution, blah blah, but Tesla's vehicle count is in the hundreds of thousands - TOTAL! while Detroit 3 pump out say 10 million trucks a year. Meanwhile all over the world people are switching from their Toyota Corollas and Volkswagen Golfs to crossovers which use more gas. So that's about for the demand side.

Now let's look at supply. Over the past decade essentially Iran and Venezuela have dropped off the oil map. These are/were 2 of the largest producers of oil with some of the largest reserves on the planet. Oil prices did what? They went down! This summer you had the attack on Aramco facilities. At any point in the past 30 years this would have been a majour event. This time it was basically a global yawn. All of this points to a very, very well supplied market of oil. So I think tat E&Ps are in a very tight spot right now.

MID STREAM

In my view this is where it's at.

They call mid stream energy. I have no idea why since it looks very different than up stream. People buy trucks and crossovers, but do you see any new refineries popping up? There's a massive switch from coal to nat gas. Yea you can frack the hell of of the soil and bring the price of nat gas to naught.  But there's only one way to bring nat gas to a nat gas power plant.

Then you have the infinite wisdom of index funds. Where you direct capital flow by sector and a nat gas regulated mainline is the same thing as an E&P and they get dumped at the same rate. I mean, you just gotta love these guys!

Out of the whole bunch what I find most interesting is EPD followed by PSX. EPD being more pure play. The only reason why I haven't backed the truck on EPD is that I'm still doing research to understand their recent profitability spike and whether it can be reversed or it's here to stay. But it sure looks that most of mid stream is undervalued to some degree. And that's actually saing something in a time when it's hard to find anything that's undervalued.

mcliu

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Re: Energy Sector
« Reply #22 on: February 01, 2020, 05:00:44 PM »
Isn’t Cramer usually a contrarian indicator?

Spekulatius

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Re: Energy Sector
« Reply #23 on: February 01, 2020, 05:22:11 PM »

MID STREAM

In my view this is where it's at.

They call mid stream energy. I have no idea why since it looks very different than up stream. People buy trucks and crossovers, but do you see any new refineries popping up? There's a massive switch from coal to nat gas. Yea you can frack the hell of of the soil and bring the price of nat gas to naught.  But there's only one way to bring nat gas to a nat gas power plant.

Then you have the infinite wisdom of index funds. Where you direct capital flow by sector and a nat gas regulated mainline is the same thing as an E&P and they get dumped at the same rate. I mean, you just gotta love these guys!

Out of the whole bunch what I find most interesting is EPD followed by PSX. EPD being more pure play. The only reason why I haven't backed the truck on EPD is that I'm still doing research to understand their recent profitability spike and whether it can be reversed or it's here to stay. But it sure looks that most of mid stream is undervalued to some degree. And that's actually saing something in a time when it's hard to find anything that's undervalued.

I own some WMB, which I consider undervalued, despite the noise around bankruptcies impacting their G&P operations. I like EPD, but I don’t like dealing with MLP, unless I absolutely have to and I am willing to make a larger and long term commitment. For me PSX is the most interesting as their midstream and chemical business becomes a larger part of their cash stream, yet it still is largely valued as a refiner. it has the Buffet seal of approval (despite the fact that he exited) and their share buybacks truly identify it as a cannibal. In the CC, they mentioned that thy have ~900M annual EBITDA thwt could be dropped down into their MLP. Do this at 10x EBITDA while the stock trades at 7x and we are talking about serious value accreditation.
« Last Edit: February 01, 2020, 05:29:31 PM by Spekulatius »
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SharperDingaan

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Re: Energy Sector
« Reply #24 on: February 02, 2020, 05:04:27 AM »
You might want to keep in mind that location and investment horizon matters.
If you're US based, and just trading, it's hard to see past the pending shale BKs, falling nat gas prices, and the various reporting 'spins'. To you, the whole industry is sh1te, and getting worse - because you're trading headlines, not fundamentals. And you do so as you've no intent in holding long enough for changing fundamentals to matter.

Nothing wrong in that. But you're the gambler in the casino, and addicted to 'the trade'.
Not a good combination.

SD

 
« Last Edit: February 02, 2020, 06:16:44 AM by SharperDingaan »

rb

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Re: Energy Sector
« Reply #25 on: February 02, 2020, 06:52:52 AM »
I own some WMB, which I consider undervalued, despite the noise around bankruptcies impacting their G&P operations. I like EPD, but I don’t like dealing with MLP, unless I absolutely have to and I am willing to make a larger and long term commitment. For me PSX is the most interesting as their midstream and chemical business becomes a larger part of their cash stream, yet it still is largely valued as a refiner. it has the Buffet seal of approval (despite the fact that he exited) and their share buybacks truly identify it as a cannibal. In the CC, they mentioned that thy have ~900M annual EBITDA thwt could be dropped down into their MLP. Do this at 10x EBITDA while the stock trades at 7x and we are talking about serious value accreditation.
Why don't you like MLPs? Is it just the tax implications or are there other issues?

Spekulatius

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Re: Energy Sector
« Reply #26 on: February 02, 2020, 07:26:57 AM »
I own some WMB, which I consider undervalued, despite the noise around bankruptcies impacting their G&P operations. I like EPD, but I don’t like dealing with MLP, unless I absolutely have to and I am willing to make a larger and long term commitment. For me PSX is the most interesting as their midstream and chemical business becomes a larger part of their cash stream, yet it still is largely valued as a refiner. it has the Buffet seal of approval (despite the fact that he exited) and their share buybacks truly identify it as a cannibal. In the CC, they mentioned that thy have ~900M annual EBITDA thwt could be dropped down into their MLP. Do this at 10x EBITDA while the stock trades at 7x and we are talking about serious value accreditation.
Why don't you like MLPs? Is it just the tax implications or are there other issues?

I prefer c-Corp over MLP mostly due to ease of dealing with them (no K-1). Energy and even midstream is cyclical and volatile, so one can benefit from buying and selling at the “right time “. MLP are a pain in the butt when dealing with partial sales, distribution recapture etc. Also, 60% + of my assets are in tax deferred accounts, which are no-go for MLP (UBTI concern).
I would consider an MLP (and indeed own one) for a long term holding only, preferably something I never intend to sell. I think only EPD is really of high enough quality and even there are rumbling about converting to a c-Corp.
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DooDiligence

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Re: Energy Sector
« Reply #27 on: February 02, 2020, 07:57:11 AM »
I own some WMB, which I consider undervalued, despite the noise around bankruptcies impacting their G&P operations. I like EPD, but I don’t like dealing with MLP, unless I absolutely have to and I am willing to make a larger and long term commitment. For me PSX is the most interesting as their midstream and chemical business becomes a larger part of their cash stream, yet it still is largely valued as a refiner. it has the Buffet seal of approval (despite the fact that he exited) and their share buybacks truly identify it as a cannibal. In the CC, they mentioned that thy have ~900M annual EBITDA thwt could be dropped down into their MLP. Do this at 10x EBITDA while the stock trades at 7x and we are talking about serious value accreditation.
Why don't you like MLPs? Is it just the tax implications or are there other issues?

I prefer c-Corp over MLP mostly due to ease of dealing with them (no K-1). Energy and even midstream is cyclical and volatile, so one can benefit from buying and selling at the “right time “. MLP are a pain in the butt when dealing with partial sales, distribution recapture etc. Also, 60% + of my assets are in tax deferred accounts, which are no-go for MLP (UBTI concern).
I would consider an MLP (and indeed own one) for a long term holding only, preferably something I never intend to sell. I think only EPD is really of high enough quality and even there are rumbling about converting to a c-Corp.

Are you forced to sell & pay the taxes in a C corp conversion?

Why would they consider such a move?
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Lance

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Re: Energy Sector
« Reply #28 on: February 03, 2020, 02:38:01 PM »
I own some WMB, which I consider undervalued, despite the noise around bankruptcies impacting their G&P operations. I like EPD, but I don’t like dealing with MLP, unless I absolutely have to and I am willing to make a larger and long term commitment. For me PSX is the most interesting as their midstream and chemical business becomes a larger part of their cash stream, yet it still is largely valued as a refiner. it has the Buffet seal of approval (despite the fact that he exited) and their share buybacks truly identify it as a cannibal. In the CC, they mentioned that thy have ~900M annual EBITDA thwt could be dropped down into their MLP. Do this at 10x EBITDA while the stock trades at 7x and we are talking about serious value accreditation.
Why don't you like MLPs? Is it just the tax implications or are there other issues?

I prefer c-Corp over MLP mostly due to ease of dealing with them (no K-1). Energy and even midstream is cyclical and volatile, so one can benefit from buying and selling at the “right time “. MLP are a pain in the butt when dealing with partial sales, distribution recapture etc. Also, 60% + of my assets are in tax deferred accounts, which are no-go for MLP (UBTI concern).
I would consider an MLP (and indeed own one) for a long term holding only, preferably something I never intend to sell. I think only EPD is really of high enough quality and even there are rumbling about converting to a c-Corp.

Are you forced to sell & pay the taxes in a C corp conversion?

Why would they consider such a move?


Changes to the tax code and a broader base of potential investors (some investors can't invest in MLPs).

Thanks
Lance

james22

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Re: Energy Sector
« Reply #29 on: February 03, 2020, 02:46:16 PM »
Bought a little VGELX today.
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