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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: E_K_S who wrote (38674)	8/2/2010 11:42:35 PM
From: Spekulatius	Respond to of 78749

re MLP's You should really look here: investorvillage.com Most investors in MLP's look at distributable cash (cash flow - maintenance expenses/Capex) as a metric instead of earnings yield. Most MLP's will distribute the majority of their distributable cash (90%+) but some will keep some especially in good years. Maintenance expenses are a somewhat iffy number and one should keep in mind that some assets have a finite life (NG gathering systems for example) while pipelines can last for decades. I also recommend to look at EV/EBITDA since you can compare taxable cooperations with MLP's using this metric. You will find that most MLP trades at substantial premiums to taxable equivalents right now. During the crisis some MLP traded at no premium at all and sometimes even at a discount. MLP's tend to be very sensitive to the condition of the credit markets.

To: E_K_S who wrote (38674)	8/3/2010 11:53:57 AM
From: MCsweet	Respond to of 78749

EKS, I think Spekulatius provides a good answer for evaluating MLPs, so basically I would go with that. Here are a few more comments, though. I'd say distributable cash flow (Price versus disbtributable cash flow or distributable cash flow yield) is the primary factor most analysts use for evaluating MLPs. To the extent this is correctly reflected in dividend yield (which I don't think it necessarily is), then dividend yield is an approximate measure when comparing across MLPs. EV/EBIDTA seems reasonable for comparison of MLPs versus regular companies. I would think MLPs in general should trade at a premium because of their tax advantage. That is why it is economic for companies to spin-off assets to MLPs and both sides seem to do ok. You probably also want to factor in the potential growth in cash flow (organic growth good) and volatility of underlying assets (pipelines lower volatility and hence better than production unless you are a big energy bull). MC

To: E_K_S who wrote (38674)	8/5/2010 10:03:46 AM
From: E_K_S	Read Replies (1) \| Respond to of 78749

The Government could take away or reduce substantially the tax benefits of MLPs (to raise needed revenues) thus making these investments less attractive over the common stock equivalent investments. Limited Partnerships Let Wealthy Play Oil Tycoons in Yield Hunt noir.bloomberg.com From the article:"...Investors are pouring into energy-related MLPs, increasing their market capitalization 20 percent as of July to $183 billion from $152 billion in 2009, said Michael Blum, a managing director at Wells Fargo Securities, a unit of San-Francisco- based Wells Fargo & Co. *About 90 percent of new equity in the partnerships last year came from retail investors, he said.* ..." <snip> "...Typically 75 percent to 80 percent of the cash distributions are tax-deferred until units of the MLP are sold, which is appealing to high-income earners worried about taxes, said Lyman. In 2011, federal income tax rates are expected to rise to as high as 39.6 percent from 35 percent, unless Congress acts. Broke Government Moore, the investor, said he worries the government might take away the tax advantages of MLPs to raise revenue..." ========================================================================== Maybe thats a reason to stay with a Fund rather than with individual MLPs. EKS