Interest rates have hardly moved all week—plus and minus a couple basis points. In the ‘olden’ days we would call this ‘tension on the tape’–meaning each day there is little to no movement ‘tension builds’ for a big breakout one way or another–whatever!!
I note that the NGL Energy (NGL) preferreds have been getting hammered. Both of these are fixed-to-floating and the NGL-B issue had spent months and months climbing from the $10 area up to $14–now giving back much of those gains with the new administration in place.
The ‘C’ issue is even worse–finally climbing toward $16 by falling back hard to $12.32.
Current yields are both closing in on 20%.
No one can say if these are ‘bargains’–I know I wouldn’t own them, but I am a chicken investor. A close review of their recent financials should be undertaken by potential folks–even with reasonable financials these shares are trading on the ‘fear of the unknown’–what does the future hold.
To those of you concerned about your NGL preferred (or common) I have it on good authority that your concerns are misplaced:
https://seekingalpha.com/article/4270074-ngl-energy-2-stable-preferreds-offering-9-yield
In truth, the yield going forward is going to be zero. The company will have a very tough time digging out of the debt hole. The interest rate on newly rolled 2.5 billion in debt is going to be crushing.
Bob, Moron and the boys are truly baseballs version of Mario Mendoza. Like Mario they also have a .200 career batting average.
Bob , Thanks for the Sat. morning chuckle from the comic strip.
Knew before I clicked on it who it was going to be.
“Both are lower risk investments and suitable for our conservative members.”
Quiet days are the most reliable. Accumulate dividends and make several trades for $40 profit while not losing any money, it adds up.
Martin, I have hit the $50 trade plays out of boredom myself lately. But a few good scores too. Someone cleaned out the other day the rest of my Ocean Spray almost all sold $6 higher than I paid a few months back. Wish I had bought more, ugh…PW-A was a quick big purchase flip for about 70 cents ave per share for a week hold. And CNIGP recently bought is a $1.50 higher. Hoping they find a suitor to run that one up more still.
Lately I’ve been doing mostly arbitrage trades between different issues from the same company. Small profits but you rarely lose money on arb trades. The $40 trades are in addition to the regular dividends if I always own one or another.
CIM preferreds have been a good one to swap around. Since AFINO came out it’s been a good swap with AFINP, sometimes almost the same price and sometimes up to 40 cents difference.
NGL has to refinance a big chunk of debt in 2021 and they have been unable to do so on good terms. They are out doing a 144 financing and the rate, when known, is going to be eye popping. It’s going to suck up all the cash for years. The common divi will go to zero and I suspect the preferred will, too.
https://www.sec.gov/Archives/edgar/data/1504461/000150446121000009/exhibit992pressreleasedate.htm
Most other energy firm are doing well and have a lot of upside.
Tim,
I did place an order for it. I have a large portion of my portfolio invested in Energy securities. I just retired after a 45-year career in one of the large supermajors. I started in career when oil was a proxy for economic growth and ended my career when oil was comparable to tobacco. But my own view has not changed. I believe there is one hurrah left in oil. While California may have moved on to Tesla, the ROW still needs oil for at least one or two more decades.
I believe the reason is that NGL is issuing new senior notes that don’t permit them to pay dividends until they get back to compliance with certain covenants.
https://seekingalpha.com/article/4400162-ngl-energy-partners-lp-distribution-coverage-may-get-shattered-after-new-offering?utm_medium=email&utm_source=seeking_alpha&mail_subject=geo-group-this-11-yield-will-surprisingly-benefit-from-the-blue-wave&utm_campaign=nl-investing-income&utm_content=link-12
Not for me- any day.
I think the market quietness may be partially due to a game changing drug announcement by Eli Lilly yesterday in USA Today: “Monoclonal antibody treatment by Eli Lilly found to cut risk of serious Covid 19. “A drug developed by Eli LIlly dramatically reduced the risk of developing symptomatic Covid 19 among nursing home residents, the company said. Of 299 residents, half receiving placebos, those randomized to receive the drug BAMLANIVIMAB had up to an eighty percent lower risk of contacting COVID 19. Among 41 (nursing home) residents who already tested positive NONE died after receiving the drug…… Having been in the elder care field for over 15 years, this is a major development that could significantly reduce hospitalizations, death and the horrible news that affects us and our investments
FYI – This Eli Lilly announcement about BAMLANIVIMAB is not anything new or game changing (although it is highly effective if given at the right time). This drug has been out under Emergency use Authorization for I think at least 4 or 5 months now. It is similiar to Regeneron. The Feds bought up the supply of both and made it available to states I believe at no cost. The problem is some providers have not been providing it because it needs to be administered via an IV. So unless your MD is in the know, a patient really needs to push for it if in the right timeframe. Here is the federal website showing locations providing it:
https://protect-public.hhs.gov/pages/therapeutics-distribution#distribution-locations
Maverick61 Yes, the monoclonal antibodies have been around but the testing of the efficacy of the drug had not been completed to support a public statement by Eli Lilly in USA Today until January 21, 2021. I do know that patients who are well off have been receiving IV injections for some time. Eli Lilly is now pushing for wider spread use by those who are not well off and having the government provide funding to avoid the huge daily death count in the USA and the huge fear in the economy due to covid. The government could also push insurance companies to pay for more treatments from these drugs. Eli Lilly can now provide news organizations (who they advertise with heavily) a better story in the efficacy of their drugs by this study –alerting the public to ask for these drugs from their doctor.
Followthemoney,
The empirical evidence on the monoclonals has been very good for many mos now, with the caveat that it be started very early after infection. The recent Eli Lilly announcement you point to consolidates what we were seeing on the ground. The challenge is a) 200,000 new cases per day (this is when you want to begin therapy) is way beyond manufacture capacity; and b) genetic viral mutations which could potentially render manufactured lots sub-type specific.
I’d argue the ‘tape tension is due more to lack of clarity around the prospects of passing the proposed $1.9T stimulus package the new admin has put forward. If yes, the market has legs.
Agree FJ,
New admin hit the ground running but the run up in the market to this point was on expectation of this new stimulus. If it gets bogged down for too long I expect you would see a drop in the market.
I have sold a few stocks over the past 2 weeks and have bids in on some preferred that come within 1 to 2 pennies of my ask. Not willing to raise the ante in case market breaks to the downside.
Fredson:
Thank you for your comments and information. It will be hard for Mitch M to block the stimulus in my opinion after Biden went to Georgia and got 2 senators elected in Georgia touting the $2000 per person stimulus as a reason to vote democratic. What Republican Senator coming up for election in 2022 — where there is any good challenger — votes against the stimulus after watching his two Georgia Republic Senate colleagues lose?
An extra $1400 tax free to each person in the income limits allowed may for many Americans be the only money they have in their savings accounts.
Biden understood that fact and Mitch chose to ignore the fact and focus on the deficit.
In going thru the article on the link you provided I thought it was quite funny that the writer provided a “Kenny Loggins Scale”. I found it quite humorous. The only energy patch I own anymore is EPD which I feel very comfortable with. Their 6.875% bonds of 3/1/33 are trading at $140.277. I think that tells you quite a bit about what Wall Street Bond Gurus think about them.
Chuck P,
I’ve got scattered chunks of senior EPD debt out to the ’38 7.55 coupon. When the common dropped under $20, I started to sell lots of senior and picked up the common.
As I’ve posted here before, pick up the EPD and MMP common at 8-10% dividends, treat the holdings like bonds. The div are higher than the senior coupons, and the underlyings are solid. Space out entries in the commons to keep cost average in range. K-1s are no biggies.
I own some EPD (purchased in 2019 – unfortunately), and would not talk anyone out of buying it today at a better price than I did. But if the K-1 is an issue, you can get OKE or WMB with almost the same dividend and no K-1
other energy options, it depends on personal circumstances but anyone concerned about K-1’s can always hold “say” 400 shares of EPD in a “Roth” or “trad IRA” and be in compliance, even with a 10% distribution increase over the $1.80 going forward and still be under $ 1000 UBIT limit, very possible if the rules are followed and no other Mlp’s are involved. In the same corporate non K-1 Idea mentioned, ENB held in retirement accounts has no Canadian withholding and no limitation of amount held.
Distributions are not UBTI, Mike. It is reported separately on the K-1 from distributions. Besides, EPD has consistently reported negative UBTI ever since I’ve owned it. I’ve had a few thousand units of EPD in my IRA and they’ve never triggered the $1,000 UBTI limit.
But what WILL produce a lot of UBTI for you is selling an MLP you’ve held for years in your IRA. So I never sell them. I just transfer them out of the IRA as part or all of my RMD.
JMO. Consult a tax pro if you’re unsure.
Discussions of MLPs and UBTI always seem to draw interest.
After having worked the problem for many years I have come down on the side of not putting any UBTI generators (positive or negative) in a qualified account. Preferred of MLPs are fine (no UBTI) and some MLPs just don’t produce much if any UBTI. Some partnerships, notably the Brookfield companies, tell you upfront that they run the business so as not to generate UBTI. I know I won’t get any UBTI from BEP or BIP.
Most partnership K-1s are OK to deal with if you use tax software. Some are a horror and I won’t deal with them. OAK was an example. The trickier part of MLP taxes come when you sell. There is a lot of accounting to keep up with. Recapture of this, basis adjustments of that. The tax software won’t do it for you. If I buy an MLP I plan on holding it a long time.
Bob-in-DE, It is reassuring to know I’m in this company I to hold Bip, and the previously mentioned EPD, feel confident with both. thanks to both you and camroc for the input.
camroc, I’m aware of what you stated, I just asssume the distribution is all ubit that way I’m safe regardless what is reported after the fact. if you keep, total distribution under $1000 you’ll never get caught with your pants down. if you know for sure in advance you could obviously hold a lot more in combination with multiple MLP’s or in total alone. Thanks for the detailed explanation.