(B)(N) BWP Boardwalk Pipeline Partners LP

Locusts? $3 billion? In Madagascar
Map Courtesy of Boardwalk Pipeline Partners LP

Drama. The market value of Boardwalk Pipeline Partners LP tanked this week from $6 billion to almost  half-price, $3 billion or so. The partnership was forthright about its revenue and earnings prospects for the year and cut the dividend from $500 million per year and an extraordinary (Ponzi-like) yield of 8% with a stock price of $30, to just $100 million per year for a current yield of 3% at the current prices of around $13 per share. (PRNewswire, February 10, 2014, Boardwalk Announces Fourth Quarter 2013 Results And Announces Quarterly Distribution Of $0.10 Per Unit).

However, a difference of $400 million per year and some capital gains is not the same as $3 billion now and $6 billion yesterday and investors who managed to sell their shares at $25 to $30 before the blow-out are doing very well to buy their shares back at $13 for the company they liked at $30 and rising; whereas investors who managed to buy those shares are not so happy and might have to “double-down” in order to feel “whole” again. Please see Exhibit 1 below.

Exhibit 1: (B)(N) BWP Boardwalk Pipeline Partners LP – Risk Price Chart

(B)(N) BWP Boardwalk Pipeline Partners LP

Boardwalk has been in the Perpetual Bond™ since much lower prices of $20 to $25 three years ago but we were stopped out at $30 in October last year and haven’t come back in because the stock is trading below the price of risk.

(Please Click on the Chart to make it larger if required.)

We’re always buckled-up and hope for a surprise but, from the chart, something has been afoot for a while that might affect the flight of even more “hot money” in the wings.

Nevertheless, the industry paid $11 billion in dividends last year for an aggregate dividend yield of 5% and an extraordinary return of earnings of 124%. Moreover, the price yield of 4% seems to run in lock-step with the dividend yield and might explain what happened to Boardwalk and El Paso Pipeline Partners this month. Please see Exhibit 1 below for the fundamentals.

Exhibit 1: Midstream Energy MLPs – Fundamentals – February 2014

Midstream Energy MLPs – Fundamentals – February 2014

(B)(N) The Fairly-Valued Midstream Energy MLPs – February 2014

The Chart on the left suggests that investors find “fair value” with a 5% dividend yield and a reliable “liquidity“. The money that might leave one of them has a high likelihood of ending up in one of the others.

However, only five of the twelve are in the Perpetual Bond™ at the moment and that portfolio returned +21% last year (plus dividends) and is up +2.6% so far this year but our estimate of the downside due to the demonstrated price volatility is minus (7%) absent surprise. Please see Exhibit 2 and 3 below.

Exhibit 2: (B)(N) Midstream Energy MLPs – Prices & Portfolio – February 2014

(B)(N) Midstream Energy MLPs – Prices & Portfolio – February 2014

Exhibit 3: (B)(N) Midstream Energy MLPs – Portfolio & Cash Flow Summary – February 2014

(B)(N) Midstream Energy MLPs – Portfolio & Cash Flow Summary – February 2014

(Please Click on the Chart to make it larger and again if required.)

For more information on the chart elements and additional references to the theory, please see our Post, The RiskWerk Company Glossary.

And for more on what risk averse investing has done for us this year, please see our recent Posts on The S&P TSX “Hangdog” Market or The Wall Street Put or specialty markets such as The Dow Transports & Utilities or (B)(N) The Woods Are Burning, or for the real class action, La Dolce Vita – Let’s Do Prada! and It’s For You, Dear on the smartphone business.

And for more stocks at high prices, The World’s Most Talked About Stocks or Earnings Don’t Matter – NASDAQ 100. And for more on what’s Working in America, Big Oil, Shopping in America or Banking in America, to name just a few.

Postscript

We are The RiskWerk Company and care not a jot for mutual funds, hedge funds, “alternative investments”, the “risk/reward equation” and every other unprovable artifact of investment lore. We have just one product

The Perpetual Bond™
Alpha-smart with 100% Capital Safety and 100% Liquidity
Guaranteed
With No Fees and No Loads on Capital

For more information on RiskWerk, please follow the Tags or Categories attached to this Letter or simply enter Search for additional references to any term that we have used. Related data may be obtained from us for free in a machine readable format by request to RiskWerk@gmail.com.

Disclaimer

Investing in the bond and stock markets has become a highly regulated and litigious industry but despite that, there remains only one effective rule and that is caveat emptor or “buyer beware”. Nothing that we say should be construed by any person as advice or a recommendation to buy, sell, hold or avoid the common stock or bonds of any public company at any time for any purpose. That is the law and we fully support and respect that law and regulation in every jurisdiction without exception and without qualification to the best of our knowledge and ability. We can only tell you what we do and why we do it or have done it and we know nothing at all about the future or the future of stock prices of any company nor why they are what they are, now. The author retains all copyrights to his works in this blog and on this website. The Perpetual Bond®™ is a registered trademark and patented technology of The RiskWerk Company and RiskWerk Limited (“Company”) . The Canada Pension Bond®™ and The Medina Bond®™ are registered trademarks or trademarks of the Company as are the words and phrases “Alpha-smart”, “100% Capital Safety”, “100% Liquidity”, ”price of risk”, “risk price”, and the symbols “(B)”, “(N)” and N*.