I’m filing this update from the beach. I’m on vacation the week of March 29 April 2. Unless the sun stops shining here in the Bahamas (or the kids decide to hire themselves out on a fishing boat), I don’t anticipate filing more than once a day for this week. JubakPicks.com will go back to its normal schedule on Monday April 5.
Update Energy Transfer Partners (ETP)
Energy Transfer Partners (ETP) has hit my $47 target price just about on schedule. But I don’t see any reason to sell these master limited partnership units out of Jubak’s Picks quite yet. As I wrote in July 2009, “The longer the Federal Reserve promises to keep interest rates low, the more valuable Energy Transfer Partners (ETP) is and the longer I want to hold it.” The Fed’s target for shorter interest rates is still at 0% to 0.25% and the promise is still to keep rates at that level “for an extended period.” Long-term interest rates have begun to push upward in anticipation of an eventual change in Fed policy, or inflation, or the depreciation of the dollar, or whatever, but the 7.84% yield on these units is still comfortably ahead of that increase. (For more on Federal Reserve policy see my post https://jubakpicks.com/2010/03/16/fed-holds-interest-rates-near-0-but-continues-to-reduce-role-in-the-markets/ )
So what’s ahead for Energy Transfer Partners?
The partnership has completed or is nearing completion on one set of new pipelines. Those are likely to push EBITDA to $1.8 billion in 2010, according to Standard & Poor’s. That puts the partnership in a position to pursue acquisitions or new capital spending that tie new natural gas production regions such as the Marcellus Shale and Haynesville geologies into its existing pipeline system.
As of March 30, 2010, I’m raising my target price to $52 a share by November 2010.
Full disclosure: I own shares of Energy Transfer Partners in my personal portfolio.
I love my oil and gas MLP pipelines that have been real producers in my portfolio. Howver, things are slowing down and their are now some competing pipelines and a glut of gas. Contracts are running out and renewing at lower levels so not sure this is the place to be in the near future. I am looking for some solid reason to stick around!
taterbug,
I must admit, I’ve been watching the price of natural gas dropping with “investor’s salivation” (yes, I made up that phrase). But when will it change course? I just don’t see anything on the horizon that will send it up.
The demand side is weak (where will increased consumption come from?), and the supply side seems to keep getting stronger (now we have Exxon hopping into it). That’s not a good recipe for increasing a commodity’s value.
Ed, I was curious to your thought, or anyone else’s, on Natural Gas. I have owned CHK for 1 yr but may be interested in buying more?
Saurin,
For the record, my next buy order on PALL is set at $46. It’s currently nearing $48. It may not drop for another day or two, possibly not until next week.
And thanks for the compliment! 🙂
Thanks Ed. Helpful as always. I bought some IMPUY.PK when Jim suggested. It is doing good. But I see a lot of fluctuations in it. Will hold the GG till Jim gives an update and will buy some PALL when the money comes in. Thanks Again
Soonerxii,
One thing a lot of gold bugs seem to be missing is that while the central banks are burning up their presses, the central governments are increasing their tax rates. All that extra money doesn’t stay in the economy long.
Mind you, I’m not dismissing the inflationary argument. The potential for inflation is definitely there. I just prefer the platinum/palladium play to the gold play.
I’m a fan of GG if you are buying a PM miner…also like AEM and the old standby NEM.
Silver own PAAS and juinior miner GSS and some spec plays.
and both ETF as well…any central bank with a printing press is burning that press up! Everyone should have AT LEAST some moderate exposure to PM, imo.
Saurin,
For you and the other gold bugs out there, read this:
http://www.thestreet.com/story/10714462/1/leaving-gold-for-platinum.html?kval=dontmiss
Now, before you run out and buy platinum, compare the charts for the platinum ETF (PPLT) to the charts for the palladium ETF (PALL).
Platinum and palladium are similar metals used in many of the same industrial applications. Platinum is a little better, but it also costs almost 4 times as much as palladium. Palladium’s price rides platinum’s coattails.
Even IF you think gold will rise, and I think it will, the beauty of platinum or palladium is the lack of much downside. For example, in a deflationary environment, gold would drop like a rock (pun intended), but platinum and palladium would only drop a little as industrial demand would buoy their prices.
As for mining stocks, that is one area where Jim and I disagree. Unless a mining company can show me they know how to run their books (most mining companies seem to carry heavy debt loads and poorly manage their ROI), I would rather buy a physical ETF like GLD, PPLT, or PALL than the mining company that provides it.
(NOTE: I did make an exception for Lynas Corporation, but only because there is no physical ETF for rare earth metals. The only way to play the commodity was through a mining company.)
I bought GG on an aquisition rumor 2-3 yrs ago. Made a bundle.
I am not doing anything spectacular until the volume picks up and the technicals give me a direction. After Easter at the earliest. It was a perfect week for Jim to take the kids to the Islands.
I bought GG around begining of 2010 and have taken a heavy beating. It is -20%. I am a novice in investing and if anybody could help me in this, please. Ed??
Jim, enjoy your vacation.
KenBest,
I personally believe that it’s an investor’s duty to have an opinion on the state of the economy and the markets in general. Whether that opinion is correct is another matter. 😉
Seriously, think about it this way: You have money to invest. Regardless of your life situation, you have to determine how much risk to take with your portfolio, and where that risk (or lack of risk) will get you the best return. 40 years ago, investors had it pretty easy: U.S. stocks, bonds, and a few mutual funds to choose from. Nowadays, we have ETF’s for just about every kind of exposure imaginable, stocks from just about every country in the world, bonds for everybody’s debt, mutual funds out the wazoo, and let’s not forget options trading. There are more options for investing than there are players in the NFL!
When presented with all these options, the best way to narrow the choices is to start with a macro view: what is the world economy doing? Work down from there, eliminating investments along the way until you get to areas where you think there can be growth.
THAT is why I am willing to stick my neck out with a bold prediction: because I have to with every investment I make.
juday3,
As you pointed out, several institutional investors have pulled out of Lynas. I don’t think it’s necessarily because of anything new that’s wrong with Lynas. I think in a shaky economy, a company like Lynas becomes a much bigger risk, because it will be harder for them to find new financing if they burn through the cash they have. In a good economy, where the financing flows freely and the tax burden is reasonable, we can afford to invest in companies like Lynas.
I will state that I am NOT speaking for Jim on this.
WELL,, SIR ED…
YOU JUST PUT YOUR REPUTATION ON THE LINE,
(sort of ) with your “2 cent prediction”. I MUST SAY YOU IMPRESSED ME BY STEPPING OUT ON THAT LIMB WITH ALL THE WORLD JUST WAITING FOR THE OPPORTUNITY TO CRITICIZE.
THE BEST OF LUCK, 🙂
MYSELF, I’M SHAKING LIKE A HOUND IN PEACH
SEASON.!
DOES THAT CONSTITUTE A WALL OF WORRY.?
Best thing I ever learned from Jim Cramer……..don’t be afraid to take profits (and it took me a while to learn that). It’s advice that I listened to with both Coach and Lynas. I also factored in a little bit of Buffet advice here…….that being he only invests in businesses he understands.
I liked Jim’s logic on COH, and I took a risk to buy in. I agree with his logic yesterday to hold on to it. But, I’m taking my profits, particularly because women’s handbags is a business I most definitely do NOT understand. Maybe I’m missing out on more, but I’m happy to take what I got. I’m not gambling anymore.
cwt334,
If you are talking about “new” money – just sit on it!
Else, how would you have money when there is a correction – oh – you will sell out before the correction, by timing it ! Or will you sell after the correction has taken place?
Hope there was an answer to your predicament.
Suggestion – take some money off the table when you reached “target” and keep it ready (in cash or equivalent) when the opportunity arises – it always does!
Ed McGon,
Thanks for the comment. I appreciate the time….
Did something change from November when both you and Jim liked this guy at 22-23? Is it just the prevailing winds of a generally overbought market, or did I miss a negative event with Lynas?
Thanks again!
I guess the question is if/ when there is a correction where should an investor have his or money? Cash, gold, commodities. It seems harder and harder to read the tea leaves. This is what makes me nervous.
juday3,
LYSCY was one of my favorite stocks last year. This year…not so much.
I love the rare earth play, but…buying a company like Lynas during a bull market is one thing. Doing it in a bear market (even a secular bear/cyclical bull) seems like throwing money away.
Remember, Lynas’s financials are pretty crappy (HEAVY debt!), even if their potential is good. I can’t in good conscience buy it above $20/share, and I’d really rather get it below $10/share.
Save your money and wait. I suspect you’ll see a better opportunity to buy it later this year. Hang in there.
YX,
My two cent prediction, for what it’s worth…
I think we’ll see a correction Thursday, possibly running into Friday. However, I also think the market will bounce back, and should do well through May or June.
On the other hand, July could be VERY ugly. Between the 2Q earnings and Spain refinancing it’s debt, we could have a major correction then.
GG,,,,, I am watching the USD. If GG goes up, it will be the decline in the dollar. But the market is shakey… question is will GG go up with a fall in the dollar, or will it go down with a fall in the market ?
I dunno..
I am not an expert, but I am thinking seriously about buying it. Caues the dollar is up, and the nation is deeply in debt.
I can’t for the life of me figure how it could drop much further.
And, on the plus side, nobody wants it…
My question is, should we sell any of these energy MLPs once rates start to rise? I’ve owned KMP for dividend income and I really don’t want to sell, but I might if Jim thinks the MLPs will be hurt. I mean, I can’t see how the large yields will seriously be challenged by a few percent rate rise.
Jim and others,
Any thoughts on LYSCY? Dipped under $22 today. I was waiting for it to hit this price and now I’m nervous. I noticed that both Chase and Morgan Stanley have sold quite a few shares over the last weeks and today.
Any insight would be appreciated!
Limited Partnerships seem like such a great deal. Until tax time comes along! 🙁
I wouldn’t touch GG. Glad I sold when I did.
Was thinking about adding some GG today. Anyone coming with me?
Everyone:
While Jim on vacation, can we help ourselves?
Anyone has idea about what to do with the “winners”? Cash out or hold on for more gains?
This morning, several articles seem all predict more gain. One even predicts S&P over $1350. What’s your thought.
Jim:
Enjoy your vacation! Don’t have to update anything unless the sky falling!
Jim, Enjoy your vacation.
How about an update on ORA?