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

To: Jim P. who wrote (40063)	11/15/2010 6:49:40 PM
From: E_K_S	Read Replies (1) \| Respond to of 78708

Hi Jim - I would definitely not short WPZ like the author suggest. In fact I am tempted to up my position in WMB based on their 76% ownership interest in WPZ. The article goes on to state that WMB's E&P business is grossly undervalued. From the article:"...Williams Companies’ E&P business is valued by the market at just $2.7 billion. We think it’s is actually worth $9 to $24 billion, even with sustained low natural gas prices....". That translate to $12.00/share to $35.00/share UNDEVALUED! Is WPZ so overvalued that one would short it? No way! When I looked at WPZ based on your earlier post, I concluded that WPZ had the smallest debt structure (even though high to my liking) than several of the other competitors. The key to valuating these midstream companies are their steady cash flows. The author uses 15x forward year cash flows as his valuation factor. I also like to factor in an adjustment for LT debt. WPZ has much less LT debt than EPD for example. Therefore, I still would not short WPZ even as a hedge to owning the parent company WMB in his example. I may now look at some of my other "pure" midstream MLP's to sell (ie. DPM or EPD) but if I sell I would roll the proceeds into WMB (remember every share of WMB you buy, you get .76 interest in WPZ). WPZ could be a buy for me if the price is 10% lower but I like WMB better. From the recent run up in many of these midstream MLP's, it is interesting to wonder why WMB is not much higher even with the recent announcement that the CEO is going to retire. How long can their WPZ assets and/or their other E&P holdings remain so hidden from the market's real valuation? EKS