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Going long on MLPs again...
Old 12-11-2017, 10:22 AM   #1
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Going long on MLPs again...

I was way to early the last time I went long on MLPs, but maybe the second time will work out better. I think natural gas midstream will be particularly lucrative, buying in at current prices.

I'm long on AMLP and KMI.
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Old 12-11-2017, 10:47 AM   #2
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I was way to early the last time I went long on MLPs, but maybe the second time will work out better. I think natural gas midstream will be particularly lucrative, buying in at current prices.

I'm long on AMLP and KMI.
Best in breed is EPD and MMP.
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Old 12-11-2017, 11:41 AM   #3
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Best in breed is EPD and MMP.
I do like both of those MLPs, but I'm more bullish on natural gas than oil. Although I think both have significant upside from here, I'd probably skip MMP and just buy EPD.

For individual holdings I'm going with KMI (40% of NG transport in US, 75% to Mexico, building out LNG ports/ships, no k-1s) to focus on NG.
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Old 12-11-2017, 01:23 PM   #4
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KMI...is not an MLP. They absorbed their MLP a couple or more years ago right before the MLP universe tumbled or pretty close to it. As long as you know that...

Then they slashed their dividend....which was the reason many invested.

I sold some KMI to offset some gains last month in my taxable account. Still holding some in my IRA's. Who knows..one day it may go up. I like the reach of their business and pipelines...
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Old 12-11-2017, 02:09 PM   #5
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I do like both of those MLPs, but I'm more bullish on natural gas than oil. Although I think both have significant upside from here, I'd probably skip MMP and just buy EPD.

For individual holdings I'm going with KMI (40% of NG transport in US, 75% to Mexico, building out LNG ports/ships, no k-1s) to focus on NG.
KMI is not a MLP.

Also, both EPD and MMP are large midstream pipeline companies although EPD is also a NGL producer and export tankering company. Neither one is considered an oil company.
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Old 12-11-2017, 03:28 PM   #6
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Yes, one of the benefits of KMI is that it is a c-corp. For MLPs I am using the AMLP etf which also obviates the need for k-1s.

Yes, all of these companies are in the midstream o&g industry, i.e. pipelines, terminals, etc. MMP transports oil and oil products, EPD mostly transports NGLs. KMI mostly transports NG.

All of them (entire midstream sector) fell hard the last few years due to business model issues. Their DCF did hold up well like the "toll road" model touted by them, but their share prices and dividends for some (like KMI) tanked. That's because historically MLPs depended on raising capital through shares and debt to fund expansion. With the oil crash people stopped lending to them and/or their debt rating was downgraded or threatened.

Anyway, companies like KMI have been paying down debt the last two years and are now funding operations through free cash flow. KMI has announced that they will be paying out $1.25 in 2020. If you believe them then current yield on cost should be close to 7% in qualified dividends (c-corp). My cost basis is a little better. So theoretically I'm in at around 7.40%.

AMLP is currently paying out around 7% although its possible it may drop more.

IMHO the sector will be in a turn around next year.
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Old 12-11-2017, 04:35 PM   #7
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@ESRwanabe, OK I'll bite: Do you have some information that the rest of the market doesn't know and hence isn't already fully reflected in the stock prices? After all, the current price is the point where the optimists and the pessimists balance each other out.
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Old 12-11-2017, 05:11 PM   #8
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@ESRwanabe, OK I'll bite: Do you have some information that the rest of the market doesn't know and hence isn't already fully reflected in the stock prices? After all, the current price is the point where the optimists and the pessimists balance each other out.
But as soon as he tells us, then it will spread within hours and we will lose the advantage
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Old 12-11-2017, 05:24 PM   #9
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But as soon as he tells us, then it will spread within hours and we will lose the advantage
Gene Fama ?!!?! Is that you?
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Old 12-11-2017, 08:52 PM   #10
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I have had several MLPs over the years. But I just got a letter today from Fidelity that they will charge me $300.00 to make up the T990 form or whatever it is, come 2019 for 2018. May have to rethink MLPs or change brokers.
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Old 12-13-2017, 08:48 AM   #11
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Best in breed is EPD and MMP.
+1
Long term holder of each of these. They've provided good steady income, even during the downturn. Just a very volatile asset class.
Was badly burned on that KMP-KMI deal that absorbed MLP into C-corp.
I was very heavy in MLP's when I inherited father's portfolio, and have slowly been decreasing their percentage in my allocation. Still rather high, however.
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Old 12-13-2017, 09:21 AM   #12
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I have had several MLPs over the years. But I just got a letter today from Fidelity that they will charge me $300.00 to make up the T990 form or whatever it is, come 2019 for 2018. May have to rethink MLPs or change brokers.
Just looked that Form up. UBTI? So you must have an MLP or MLPs in a retirement account? I know of one MLP which plans to never get UBTI, but it is on the royalty model. Their cash comes from mostly royalty interests and overriding royalty interests, as well as a smaller number of working interests in various producing and non-producing properties. So not a midstream company

I don't trade MLPs, but I have several buy and hold examples, including this one. Nevertheless, mine are in taxable accounts. Some SEC reporting holders of DMLP do hold at least some shares in retirement accounts.

I hold DMLP at a small unadjusted capital loss, but over the years I am way ahead because of the favorably treated distributions and the adjustments to basis caused by these. This too I consider a reason to buy these only if I plan to keep them. Selling can create a large tax bill. as many found out with KMP in the KMI changes.

I also hold KMI, bought after the recap of that system. Certainly no one knows what will or will not happen, but those who beat the drum of "the market knows all" are welcome to their opinions, but these are not God's laws, just some academics' hypotheses. Also, this belief is in full conflict to the popular idea here that "interest rates are rising", or "interest rates are falling" or anything else about trending interest rates. I happen to agree that interest rates can move in quite prolonged trends, but then I don't really subscribe to strong form EMH under most other circumstances. It would be hard to have been alive during our lifetimes and not see how strongly trending interest rates seem to be.

Ha
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Old 12-13-2017, 09:43 AM   #13
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I was way to early the last time I went long on MLPs, but maybe the second time will work out better. I think natural gas midstream will be particularly lucrative, buying in at current prices.

I'm long on AMLP and KMI.

Been in midstream MLP's for 15 years. Two plus years ago they had a horrendous drop but made it all back plus some the following year. Continue to be a great source of steady income.
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