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Art G · 04-21-2008, 03:08 PM

Quote:

Originally Posted by 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. . .

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 · 04-21-2008, 03:11 PM

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 · 04-21-2008, 03:55 PM

Quote:

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 · 04-21-2008, 04:10 PM

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 · 04-21-2008, 04:12 PM

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.

Quote:

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%.

Trapshooter · 04-21-2008, 04:30 PM

Clifp
Thanks for posting that info. Use caution if you are going to short this thing. Who knows how far up it will run before everyone realizes the distribution will be cut. Also, If you are short when it goes ex div, you have to pay the distribution.

clifp · 04-21-2008, 04:52 PM

Well it isn't $200 yet, and Schwab won't let me short it with paying a fee. So I guess I'll watch from the sidelines.

Still I'd be very cautious holding this stock for the long-term. I suspect the distribution cut will comes as rude awakening to many holders.

Art G · 04-22-2008, 10:58 AM

First off, I've held it in an IRA without any tax problem. Secondly, if I understand it, the product is a diminishing return, just like many other gas and mineral stocks I've owned in the past that have just continued to pay off for years.
I appreciate all the info posted here and will watch it closely. Perhaps I'll lower my target price on it and definitely keep moving up my stop losses.

clifp · 04-22-2008, 03:37 PM

Quote:

Originally Posted by Art G

First off, I've held it in an IRA without any tax problem. Secondly, if I understand it, the product is a diminishing return, just like many other gas and mineral stocks I've owned in the past that have just continued to pay off for years.
I appreciate all the info posted here and will watch it closely. Perhaps I'll lower my target price on it and definitely keep moving up my stop losses.

Art when I've held MLPs in an IRA, Schwab always bombards with dire warnings that if the MLP generates more than $1000 in unrelated business income, my IRA will owe money to the IRS, and Schwab while charge me a bunch of money $50-200/hour to file custodial tax returns for my IRA.

Now most of the MLP (pipelines, propane distribution, even an amusement park, and various Hawaii start ups) I own generate a negative UBTI so this wouldn't be a problem. However, my understanding is that even modest positions (say $10-20K) in a partnership can earn more than $1,000 of UBTI. I just skim the IRS pub on unrelated business income, and it is truly arcane so be careful...

FinallyRetired · 04-22-2008, 04:42 PM

Well, I jinxed it. Just when I added some more it took a nosedive. It's now hovering $1 above my stop, so I'm sure I'll be stopped out in the morning. Nice ride, though, 33% profit in 2 weeks.

Art G · 04-23-2008, 07:54 AM

Quote:

Originally Posted by clifp

Art when I've held MLPs in an IRA, Schwab always bombards with dire warnings that if the MLP generates more than $1000 in unrelated business income, my IRA will owe money to the IRS, and Schwab while charge me a bunch of money $50-200/hour to file custodial tax returns for my IRA.

Now most of the MLP (pipelines, propane distribution, even an amusement park, and various Hawaii start ups) I own generate a negative UBTI so this wouldn't be a problem. However, my understanding is that even modest positions (say $10-20K) in a partnership can earn more than $1,000 of UBTI. I just skim the IRS pub on unrelated business income, and it is truly arcane so be careful...

I guess I should know all of this, but I swear this is news to me. I've owned quite a bit in IRA's and never seen nor heard any problem tax wise. I appreciate the info. I once had some Duke energy preferred that turned into a tax nightmare. I'll have to delve further into this. Thanks for the info.
BTW, So far, this pullback looks like nothing more than a buying opportunity. However, I'd want a stop now at $145. JMO.
Did I mention this stock can be quite volatile?

FinallyRetired · 04-23-2008, 08:27 AM

Quote:

Originally Posted by Art G

BTW, So far, this pullback looks like nothing more than a buying opportunity. However, I'd want a stop now at $145. JMO.
Did I mention this stock can be quite volatile?

Not sure about that, Art, so far this looks like a similar dive in Jan just before earnings. It hit the same resistance and dived down to nearly 120. I got stopped out this morning, but thanks for a great ride. I'll keep it on my watch list. Oh, the volatility is incredible, great for trading with money that won't break you if you lose it.

Art G · 04-23-2008, 08:55 AM

I could very well be dead wrong, but I think this stock still has at least another weeks good run in it. JMO definitely.

clifp · 04-24-2008, 05:44 AM

Quote:

Originally Posted by Art G

I guess I should know all of this, but I swear this is news to me. I've owned quite a bit in IRA's and never seen nor heard any problem tax wise. I appreciate the info. I once had some Duke energy preferred that turned into a tax nightmare. I'll have to delve further into this. Thanks for the info.
?

Back in the mid 90s I had never heard of AMT. A woman at work said I should go talk to accountant since she got hit with AMT and I had more stock options than she did. When I finally went to an accountant he introduced me the wonderful Alice-In-Wonderland world of AMT, and subjecting me to decade plus of tax misery. I found that there are all kinds of deadly silent vipers lurking in the tax code. Most of the time you can remain blissfully ignorant of the dangers and keep more money in your pocket. Alas the IRS pit vipers can strike without warning and deadly consequences. The good news is there are so few hungry vipers that your risk of targeted are small. All things considered, many times I wish I had remained ignorant of AMT and taken my chances... Unrelated business expenses and IRAs may fall into this category.

Who is your IRA with?

Art G · 04-29-2008, 09:57 AM

OK, I'm convinced TNH won't be coming back up for a while. If it follows its earlier trends, it hits bottom in June and hits a peak around the last week of July.....perhaps. JMO.

Art G · 05-06-2008, 08:25 AM

Well, TNH is forming a flag formation. Which way will it go? Too bad they don't offer options on this stock. It would be the greatest of straddle plays.