TNH

[Art G]

TNH has held its support thus far and looks like it's ready for another run. The key would be a breakout above $122, but I started buying it yesterday (a bit at a time). I also would suggest a stop loss at $107. Currently it's at $116 and change. JMO though. I'm thinking it has a target price around $200 or a split is coming.

 

[Art G]

How in the heck do I get the symbol capitalized in the header?

 

[FinallyRetired]

Interesting. What's the yield? I note from several sites the yearly dividend is listed at 17.80 and a yield of 15.9%. Can that be correct and, if so, are they about to reduce dividends?

 

[Art G]

The current yield is about 9.5% and it will fluxuate from quarter to quarter. They just paid a HUGE dividend in Feb. I've owned it a few times and don't think I've ever seen the annualized yield at less than 7%, and have seen it as high as 17% for a while.

 

[bssc]

How in the heck do I get the symbol capitalized in the header?

Fixed. There was a prevent shouting function which was modified to allow stock symbols.

 

[Patrick]

Holy Cow! A 5-year return of 3484%! Unbelievable!

 

[clifp]

Ok what's the catch with TNH.

A fast growing, profitable company with growing dividend. I know fertilizer prices are skyrocketing so that explains the recent profits..

The dividends are lumpy but the trend is clearly positive

02-08-08Cash Dividend 4.450000

11-06-07Cash Dividend 2.1000000
8-07-07Cash Dividend 3.0000000
5-08-07Cash Dividend 1.5700000
2-13-07Cash Dividend 0.970000

11-07-06Cash Dividend 1.0000000
8-07-06Cash Dividend 0.920000

11-04-05Cash Dividend 0.300000
08-04-05Cash Dividend 1.450000
05-05-05Cash Dividend 0.5500000
2-10-05Cash Dividend 0.650000

11-04-04Cash Dividend 0.5000000
8-05-04Cash Dividend 0.7500000
5-06-04Cash Dividend 0.2500000
2-05-04Cash Dividend 0.250000

None of the valuation ratios look out of whack P/E 10.6 P/S 3.6 P/Cash Flow 6.3.
No debt and $13/share cash..
Oh and a skyrocketing share price.

 

[Art G]

I dunno what the catch is, but I am happy to say I've made quite a nice chunk on it. I first started buying it around $19, and have traded it a few times. It will pay for my kids college ejumacation.

 

[Art G]

Running like crazy!! I'm predicting $200. JMO.

ooops! I see I've already predicted that. Sorry.

 

[Art G]

Up another $7 today. Is this thing on??

 

[clifp]

I put in a limit order a few weeks ago and missed it. It looks like I was penny wise and pound foolish. Damn, well maybe it will come down..

 

[FlaRan]

I made a quick $19 a share on TNH thanks to this board. I bought at $119 (lucky day) and sold at $138. This was over a six-day period. I am kicking myself right now though because the stock closed over $156 on Friday. Jeepers! Not all trades are winners, but sometimes you get lucky.

 

[FinallyRetired]

Still in since 116. Haven't seen anything like this since the dot com days. Those stocks were fertilizer also, of a different kind. Thanks, Art!

 

[Trapshooter]

There is a big red flag concerning this stock that I would want to get my arms around before I would consider buying it. I didn't do a lot of research on it but I seem to recall that TNH (a limited partnership) is paying 1% of the distributions to the general partner (TRA) and 99% to the general partners (you guys who hold stock). I think this is a temporary arrangement having to do with recouping prior losses. Once they reach a certain level of distributions (fairly soon), the split will change to 50/50. If this happens the stock is going to tank.

If anyone has a differing read on this, please comment. I would probably have bought some except for this.

 

[Trapshooter]

Correction: meant to say that TRA is the Limited partner. Sorry for any confusion.

 

[Art G]

There is a big red flag concerning this stock that I would want to get my arms around before I would consider buying it. I didn't do a lot of research on it but I seem to recall that TNH (a limited partnership) is paying 1% of the distributions to the general partner (TRA) and 99% to the general partners (you guys who hold stock). I think this is a temporary arrangement having to do with recouping prior losses. Once they reach a certain level of distributions (fairly soon), the split will change to 50/50. If this happens the stock is going to tank.

If anyone has a differing read on this, please comment. I would probably have bought some except for this.

Perhaps this will help. I don't see anything in it giving me cause for concern. JMO

http://www.terraindustries.com/investor_info/tnh/tnclp_fact_sheet.pdf

 

[Art G]

I made a quick $19 a share on TNH thanks to this board. I bought at $119 (lucky day) and sold at $138. This was over a six-day period. I am kicking myself right now though because the stock closed over $156 on Friday. Jeepers! Not all trades are winners, but sometimes you get lucky.

If ya' bought cause of this board, why the heck didn't you hold on?

 

[Trapshooter]

Art. You guys are making money hand over fist on this stock. Congrats to you all. The fact sheet you referenced doesn't address the issue of the general partner taking a larger share of the distributions going forward. It is spelled out in the most recent 10k (Feb 28 2008). My interpretation is that your distributions are going to be cut significantlly starting next quarter. I don't think most of the people buying the stock and driving up the price realize this. I think people are piling in mainly because its a fertilizer stock and as a bonus it has a great dividend. When realization hits it could get ugly. Although, who knows how high it may go in the interim. I would just be ready to bail out ahead of the herd. JMHO

Good Luck and again, congrats on a good call.

Partnership Distributions
We make quarterly distributions to our partners based on available cash for the quarter as defined in our Agreement of Limited Partnership. Available cash is defined generally as all cash receipts less all cash disbursements, adjusted for changes in certain reserves established as the General Partner determines in its reasonable discretion to be necessary. We paid distributions of $144.2 million, $36.2 million and $55.7 million to our partners in 2007, 2006 and 2005, respectively.
We receive 99% of the available cash and 1% is distributed to its General Partner. Cash distributions from the Operating Partnership generally represent our available cash from operations. Our cash distributions are made 99.975% to Common Unitholders and 0.025% to our General Partner except when cumulative distributions of available cash exceed specified target levels above the Minimum Quarterly Distribution ("MQD") of $0.605 per unit. Under such circumstances, our General Partner is entitled, as an incentive, to larger percentage interests. As of December 31, 2007, the cumulative shortfall on quarterly distributions to holders of Common Units that must be paid before our General Partner receives an incentive payment was $125.3 million, or $6.70 per unit.
When cumulative distributions of Available Cash exceed specified target levels above the MQD, our General Partner's percentage interest in the Partnership's distributions of available cash at various levels follows:

Income and Distribution Allocation

Class B
Target Target Common Common General
Limit Increment Units Units Partner Total


Minimum Quarterly Distribution $ 0.605 0.605 98.99 % 0.98 % 0.03 % 100.00 %
First Target 0.715 0.110 98.99 % 0.98 % 0.03 % 100.00 %
Second Target 0.825 0.110 85.86 % 1.01 % 13.13 % 100.00 %
Third Target 1.045 0.220 75.76 % 1.01 % 23.23 % 100.00 %
Final Target and Beyond $ 1.045 - 50.51 % 1.01 % 48.48 % 100.00 %

On February 7, 2008, the Partnership announced a $4.45 per unit distribution to be paid during the 2008 first quarter. As a result of this distribution, we estimate the pro forma cumulative shortfall that must be paid before the General Partner affiliate receives an incentive payment as of March 31, 2008 is anticipated to be approximately $53.5 million, or $2.86 per unit.

 

[FlaRan]

Well, I'm really kicking myself today. However, when I buy something in my trading account and there is a pop over a certain threshold in such a short period of time, I tend to take the gains. In some cases I lose out on missed opportunities. This is one of those cases. Thanks for the recommendation though. If you have any others. . .

 

[Art G]

Art. You guys are making money hand over fist on this stock. Congrats to you all. The fact sheet you referenced doesn't address the issue of the general partner taking a larger share of the distributions going forward. It is spelled out in the most recent 10k (Feb 28 2008). My interpretation is that your distributions are going to be cut significantlly starting next quarter. I don't think most of the people buying the stock and driving up the price realize this. I think people are piling in mainly because its a fertilizer stock and as a bonus it has a great dividend. When realization hits it could get ugly. Although, who knows how high it may go in the interim. I would just be ready to bail out ahead of the herd. JMHO

Good Luck and again, congrats on a good call.

The way I'm reading is that the common shareholders get paid first. That and if shares are bought back, they are done so at the average price of the last 20 days (which admittedly would be a bit lower).
Again, maybe I'm missing something, but I'm not seeing the upcoming bad news. Can you more directly point it out to these tired eyes?

 

[Art G]

Well, I'm really kicking myself today. However, when I buy something in my trading account and there is a pop over a certain threshold in such a short period of time, I tend to take the gains. In some cases I lose out on missed opportunities. This is one of those cases. Thanks for the recommendation though. If you have any others. . .

I'm just messin' with ya'. There's no such thing as a bad profit.
I have posted a few other stocks I like right now.

 

[clifp]

Trapshooter

It is pretty much standard structure within a Master Limited Partnership for the General Partner to receive increasing share of the distribution if the partnership is successful at increasing payouts.
A 50%/50% split is common at the Tier 4 level of distributions. Most publicly traded MLP already have reached the Tier 4 distribution level. If I knew the TNH hadn't I would have been more inclined to invest not less... In general reaching tier 4 doesn't decrease the total amount of distribution it only decreases the rate of future growth.

That being said the term cumulative shortfall is a bit confusing. It is possible that you are right that the distribution to the limited partner will cut once an additional $53 million is distributed. But it would be very unusual.

 

[Trapshooter]

That being said the term cumulative shortfall is a bit confusing. It is possible that you are right that the distribution to the limited partner will cut once an additional $53 million is distributed. But it would be very unusual.

I agree that it is a bit confusing but the one thing that jumps out at me from that section of the 10k is that there is going to be a major cut in the distributions. I don't know that much about LP's but it sounds as though the limited partners are temporarily benefiting from an accrued shortfall of distributions, (possibly due to lesser cash flow in the earlier years?). I would imagine there is a provision in the partnership agreement that allows for this. At any rate, the shortfall is just about gone and the limited partners share of distributions is going to increase from 1% to 50%.

I guess if I owned the stock and was planning on holding it very long, I would call investor relations and get a clarification. If anyone does, please post here for our edification.


ART:
I think you are referring to something else regarding the share buybacks. I was only referring to the section of the 10k that I cut and pasted. The table is a lot easier to read if you go to the actual 10k because the columns on my cut and paste don't line up.

 

[FinallyRetired]

You guys are overanalyzing this stock. It's a commodity, it's food related, it's been cheap relative to the market, and nothing else is working so money piles in. Not that you shouldn't analyze it, but let me know when you conclude it's a bad stock so I can be ready ride it down on the short side

 

[clifp]

Trapshooter I did some more checking. It looks like you are right.

Here is a post from the always reliable Yahoo message boards. But it looks like the guy called investor relations.

Look folks : i see alot of uninformed folks ranting how TNH is cheap apparently in mistaken belief that the $3 divvy just earned is perpetual .

Take a few moments and read the last 10-Q . After TNH earns another $8.18 which is probably done by Q1 2008 , the earnings split with the managing partner (TRA) jumps from current 1% to 50% of everything over $1.04 . That means even if everything stays perfect in the world and nat gas stays cheap and fertilizer prices stay high and TNH can earn $3 every quarter that your divident is dropping like a rock soon .

Best case is $6 in divvvies annually if all is perfect . At $70 , thats an 8.5% yield but you can get 11% in plays like SBR and PBT currently where all you worry about is oil/gas prices , not NG prices AND fertilizer demand like you do at TNH .

I also hope all you folks know that TNH cannot be held in an IRA/401-k . Its an MLP . It generates UBTI . You will owe taxes out of your IRA .

For christs sake , if you want yield , buy MVO ! 12% yield and mostly hedged for the next 5yrs and can be held in IRA and 100% oil .

Lastly , if fertilizer demand weakens even a bit or natural gas prices climb ( 80% of TNH costs are natural gas ) , TNH earnings can drop like a rock ! I hope you all do know it was at $3 just 5yrs ago .

At $10-12 in dividends a year , TNH could justify a peak price of $100-125 area . At $5-6 in dividends a year , its probably a $60 stock tops ( maybe $65-70 since you'll get $8-9 in divvies the next 3 quarters ) .

Don't believe me ? Call Joe Ewing in investor relations on anything i've said .

I'll let the technicans and momentum investors play with this one for a while.

At $200, I'll probably short it since I don't think the fundamentals support much over $75, and far less once fertilizer prices settle back.

Still very nice call Art. I further example while I'd never make as momentum investor, by the time I figure out if the stock is good or not it is up another 50%.