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

To: Spekulatius who wrote (56978)	2/25/2016 11:56:31 AM
From: Graham Osborn	Respond to of 78763

One comment to make is even if you are an EMT advocate you still need to use the pricing of crude futures (not just spot) to discount the cash flows. The whole market right now is priced for a rebound in prices due to all the storage/ kinetic issues. So it's less about where Brent is and more about price momentum. This isn't really value territory but if you trade technically as I sometimes do there is a place for E&Ps with minimal debt IMO. Just don't buy one right before earnings ;) I won't say much more on the MLPs beyond this: PSRs are oftentimes lower that 2008, but EV/ Revs oftentimes are not. Many of these had growing revenues then and much lower debt levels, although assets have grown as well. The liquid value of the tangible assets is very tricky in the energy sector these days. There are fewer strategic buyers and a bond financing by the acquirer would be very expensive to service. In other words, now is the last time you want to have to sell off pipeline assets. With declining operating metrics and all this fuzziness on the balance sheet, PSRs could drop low - very low. Despite the large falls for some of these, I would not find another 75% loss in market cap all that surprising. OTOH, the market is basically trading these stocks like crude derivatives, so if crude jumped 20% to tomorrow these stocks would probably go ballistic. In a way the portfolio exposure is not so different from being long a conservatively financed E&P, except the latter need not pay distributions and is unlikely to go bankrupt - hence my reluctance on principle to trade them as derivatives.