ItsAValueTrap Posted January 30, 2014 Share Posted January 30, 2014 Nice write up. At expiration, the warrants should be worth 1.28X their original price. (35.47 * 1.13^3.33 – 40) / 3.16 How do you get 1.13? Are u using 5% dividend and 8% growth rate? Does warrant strike price get adjusted based on the dividend? Ugh. I put in the wrong numbers. Should be: Share price $34.10... yesterday's closing price. 1.08 or 8% growth, which is management's latest guidance. They may beat that. Warrants last trade at 3.16 Link to comment Share on other sites More sharing options...
ItsAValueTrap Posted January 30, 2014 Share Posted January 30, 2014 How do you believe Enbridge (EEQ) compares, ItsAValueTrap? I haven't really look at that. On the surface however: ENB.TO / ENB is the general partner EEQ is a limited partner EEP is a limited partner It seems to me that ENB is the most interesting. Because I'm lazy, I will compare the GPs based on dividend yield. (If they distribute virtually all of their free cash flow as dividends, and if comparing the companies based on free cash flow is reasonable, then this is ok. This comparison is no good if one set of cash flows will deplete faster than the other or not grow as fast.) ENB yields 3.14% - 10 year dividend growth of 12.3% KMI yields 4.78% I believe that KMI has grown its cash flow faster than ENB on a historical basis (just based on the IDR cash payments, without leverage; KMI has leverage). KMI has a superstar CEO so I would expect KMI to grow its cash flows faster than ENB. Link to comment Share on other sites More sharing options...
CorpRaider Posted January 30, 2014 Share Posted January 30, 2014 Yeah, OKE is another one I watch, they are projecting huge growth in the divvy but it isn't cheap right now. More something I just follow and would look at if it crashes after the spin their regulated business. Glenn, thanks for the write-up. I bookmarked your blog and will keep an eye on it going forward. I agree it looks like they are stepping down the growth guidance due to digestion issues with el paso, but I would be surprised if they weren't able to grow the dividend at least 10% per annum. Also, the fact that they are assuming no acquisitions in the guidance is a bit like living in fairyland, but I know they can't build those in. Link to comment Share on other sites More sharing options...
james22 Posted January 31, 2014 Share Posted January 31, 2014 Thanks, ItsAValueTrap. I do prefer KMR because of Kinder, but EEQ does trade below it's 5-year average P/B (KMR just above). May split my allocation. Link to comment Share on other sites More sharing options...
gfp Posted January 31, 2014 Share Posted January 31, 2014 $1.58 million purchase of KMP by a VP just filed: http://www.sec.gov/Archives/edgar/data/888228/000158474614000007/xslF345X03/primary_doc.xml (a little late, since the trade was in December) Link to comment Share on other sites More sharing options...
ItsAValueTrap Posted January 31, 2014 Share Posted January 31, 2014 Do you guys know what's happening with EPB? It seems to me that most of EPB's pipelines and infrastructure were setup to IMPORT natural gas. Just several years ago everybody thought that the US would be a net importer of natural gas. Cheniere (LNG is the publicly traded GP) was trying to permit a new greenfield LNG import terminal. Now, everybody in the US is moving towards exporting natural gas. Cheniere is currently trying to build a LNG export terminal (I believe they are fully financed or close to it). For pipeline companies, I think that the shift in market dynamics is a bit of a bad thing. There will be a period where volumes on the pipelines drop dramatically. I don't know where EPB's contracts stand... if they have locked in volume commitments, then EPB will do alright. I don't see them making money from selling excess capacity. Short-term, there is pain. Long-term contracts may be sheltering EPB from a lot of that pain. Long-term, there is opportunity. I don't know if it makes up for the pain. If you look at LNG, LNG has done alright despite the crazy reversal in the US natural gas situation. Link to comment Share on other sites More sharing options...
gokou3 Posted January 31, 2014 Share Posted January 31, 2014 Here's my writeup on the company: http://wp.me/p1mOGr-Fl Thanks for the great write-up. Link to comment Share on other sites More sharing options...
sys Posted February 7, 2014 Share Posted February 7, 2014 http://www.businessweek.com/news/2014-02-06/kinder-morgan-sued-by-investor-over-pipeline-distributions-1 Link to comment Share on other sites More sharing options...
giofranchi Posted February 7, 2014 Share Posted February 7, 2014 On the 2013 Broyhill Asset Management Letter Mr. Pavese writes about KMI. The whole letter is a very good read. :) Gio2013_Broyhill_Annual_Letter.pdf Link to comment Share on other sites More sharing options...
CorpRaider Posted February 7, 2014 Share Posted February 7, 2014 Thanks for sharing. I enjoyed it. Hmm, they like COH too. There must be something in the water. Link to comment Share on other sites More sharing options...
bobp Posted February 7, 2014 Share Posted February 7, 2014 I just want to mention for future reference the first post in this topic was pointing out that the when-issued warrants were cheap. And they were. These warrants were issued to El Paso holders in the deal. I think ElPaso holders just saw the when issued market as a chance to unload warrants at any price. These were a great example of a Greenblatt type of unloved or hated security. From the first post in this topic: "While KMI seems fairly valued to me at the moment, the 5 year warrants with a $40 strike (KMI currently at $36; KMIIV currently at $2.35) could make an attractive investment." This was dead on right. The common today is two points lower at 34 and the warrants are slightly higher at 2.48 with almost 2 years less time. The WI warrants were cheap. The gist of all this is if you see a when issued warrant in the future remember kmi. Just came across this write up on VIC: http://www.valueinvestorsclub.com/value2/Idea/ViewIdea/64602 While KMI seems fairly valued to me at the moment, the 5 year warrants with a $40 strike (KMI currently at $36; KMIIV currently at $2.35) could make an attractive investment. There's been some really good discussion on the TARP warrants - would love to hear other people's thoughts on these particular warrants. You'll note the that the warrants are trading on a when-issued basis. So I'm assuming there's some deal risk (El Paso) there. But judging from Kinder's track record, I'd expect this deal to close in May. Link to comment Share on other sites More sharing options...
ItsAValueTrap Posted February 7, 2014 Share Posted February 7, 2014 Part of the reason was that many people were shorting Kinder Morgan and going long El Paso. The borrow on KMI got really expensive. So some of the arbs started shorting the warrants instead of the common. Link to comment Share on other sites More sharing options...
CorpRaider Posted February 10, 2014 Share Posted February 10, 2014 So, it looks like corvex is putting wmb in play? Would be interested to see what kmi could do with those assets... Link to comment Share on other sites More sharing options...
CorpRaider Posted February 10, 2014 Share Posted February 10, 2014 Wow, the BWP, the pipeline company held by L slashed its distribution. Citing "marketplace weakness" and the need to reduce leverage. http://finance.yahoo.com/news/boardwalk-announces-fourth-quarter-2013-110000328.html Link to comment Share on other sites More sharing options...
gfp Posted February 12, 2014 Share Posted February 12, 2014 Richard Kinder seems to be indicating that the drop in EPB is enough already - http://www.sec.gov/Archives/edgar/data/1031190/000158474614000009/xslF345X03/primary_doc.xml Link to comment Share on other sites More sharing options...
Ross812 Posted February 12, 2014 Share Posted February 12, 2014 Wow, the BWP, the pipeline company held by L slashed its distribution. Citing "marketplace weakness" and the need to reduce leverage. http://finance.yahoo.com/news/boardwalk-announces-fourth-quarter-2013-110000328.html I remember Murray Stall talking about Boardwalk in a Horizon Kinetics white paper a few months back... I seem to remember they were building a new pipeline through Kentucky and the project had not been accounted for at all in their stock price. They stated they are cutting the dividend to pursue projects. Is this just a case of dividend investors exiting when the company as a whole will increase in quality over the next few years? Link to comment Share on other sites More sharing options...
CorpRaider Posted February 12, 2014 Share Posted February 12, 2014 I'll look for the paper, but the sheer lack of any sort of warning prior to an 81% distribution makes me seriously doubt anyone is awake at the switch (of course, that is my general opinion on L). Link to comment Share on other sites More sharing options...
Ross812 Posted February 12, 2014 Share Posted February 12, 2014 I'll look for the paper, but the sheer lack of any sort of warning prior to an 81% distribution makes me seriously doubt anyone is awake at the switch (of course, that is my general opinion on L). Agreed. I'm going to look for the white paper too and see if there is anything there the market may be missing. Reading your comment just set off an alarm bell that there was something Horizon liked about the company, that's all. Link to comment Share on other sites More sharing options...
CorpRaider Posted February 12, 2014 Share Posted February 12, 2014 I think this is it: http://www.horizonkinetics.com/docs/Contrarian_Compendium_April_2013.pdf Someone zigged when they should have zagged: "Incidentally, it has a much higher yield than a typical MLP. In 24 months, that yield could meaningfully increase at a very small risk to the company." It looks like Barron's has an article quoting a couple analysts looking at the point you raise about whether this is a situation where the yield focused investors have/will oversell BWP. Probably worth monitoring/discussing, if for no other reason than to interrupt the 7th iteration of the SHLD bankruptcy thesis related to the ABLOC. Link to comment Share on other sites More sharing options...
sys Posted February 13, 2014 Share Posted February 13, 2014 i've been thinking of creating a hybrid position with covered call and warrants. more or less 10:1 warrants to shares. the idea being to capture the dividend (hopefully more than the dividend) for the entire position with the dividend + options sale. while capturing the capital appreciation via the warrants. obviously the downside risk is greater than just purchasing and holding the stock alone. does anyone feel there is an implied richard kinder takeover put that might limit that risk? i know almost nothing about pricing leverage or using options - i'd appreciate anyone who can shoot holes in this strategy. Link to comment Share on other sites More sharing options...
saltybit Posted February 14, 2014 Share Posted February 14, 2014 The warrants went down to 2.10 today. Anyone know why? Is it because of some fallout with BWP affecting other MLPs? Link to comment Share on other sites More sharing options...
sys Posted February 14, 2014 Share Posted February 14, 2014 The warrants went down to 2.10 today. Anyone know why? Is it because of some fallout with BWP affecting other MLPs? i'm curious as well. they've been falling for a while now - while kmi scarcely moves. Link to comment Share on other sites More sharing options...
saltybit Posted February 14, 2014 Share Posted February 14, 2014 Insider purchase of 100k warrants 2/12 (2 days ago) at 2.39... http://phx.corporate-ir.net/phoenix.zhtml?c=93621&p=irol-sec Link to comment Share on other sites More sharing options...
gokou3 Posted February 15, 2014 Share Posted February 15, 2014 http://www.sec.gov/Archives/edgar/data/1420192/000095012314002334/xslForm13F_X01/form13fInfoTable.xml Kyle Bass has a large new long position in both the stock and warrants. Link to comment Share on other sites More sharing options...
RandyC Posted February 15, 2014 Share Posted February 15, 2014 I think Bass's "new" position on KMI stock & warrants was reported on his 12/31/13 13F? If he still holds them he's was underwater... Link to comment Share on other sites More sharing options...
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