MPC - Marathon Petroleum

[SharperDingaan]

Best case, how long are your really going to hold a pipeline utility? For most people it is 1-2 yrs at best, and the hold is in anticipation of higher dividends, arising from growth. Utility A (pipeline) vs Utility B (electricity) vs Utility C (busses), etc.

You buy a utility when it screws up, and it is forced to cut its dividend 50%+. Investors are bailing in droves, it is available in scale for cents in the dollar - but the underlying monopoly, regulation, and most contracts? nothing really changed. Typically management is turned over, 3-5 yrs later the dividend is restored, share price and cash yield doubles; and you rinse and repeat elsewhere.

Not for everyone, but compound returns multiple times higher, for not much additional risk.

SD

 
 

[Spekulatius]

The problem with dealing with those finite live assets is that your upside is capped, but not your downside. They work when bought at the right price, but multiple expansion is unlikely to bail you out, in fact you will more likely have to deal with multiple compression, so make sure that management returns cash aggressively.

I agree.  So I ask myself,  if the cash productivity of the business is likely to be at least stable for the next 5-7 years and a large portion of that cash is going to be returned to me (hopefully in a tax advantaged way), at what present cash yield does the risk of increasingly negative sentiment among other people (as expressed by declining multiples) no longer matter?

Without really doing any calculation, I would say this may be interesting at a ~10% cash yield.  the negative sentiment or exit multiple shouldn’t matter if you intend to hold the investment until sunset.

If you buy an MLP like EPD which would be a good example, selling is not a good option anyways because then you have to pay a lot of taxes because of the reduce cost bases from distributions so in way, you should give hoot about Mr Markets terminal valuation anyways.

[Grossbaum]

I am comfortable exiting here around $55/sh.

Perhaps some of my earlier valuation estimates will prove conservative and the stock price will continue to increase from here.

Each investor's own estimate of value for the refining business could drive large differences in overall valuation for MPC.

I will stay tuned, out of interest, to see how MPC ends up deploying the cash proceeds from the Speedway sale.

I plan on reinvesting in securities that I think may be more interesting, given current valuations.

[Dalal.Holdings]

Nice trade. I exited early with less to show for it, pity me.

If this is the early innings of reflation, E&P may have more upside than midstream or downstream. However E&P has its own problems (shale driven oversupply, capital intensive, etc).

I'm pretty much out of energy at this point.