$20 valuation? You'd better believe it! We're only two bits away from it now and the day has just begun. We've seen NGL move as much as a couple of dollars in a trading day WITHOUT news, so strictly from a trader's perspective it's looking ripe for upwards motion.
$20 represents a nice enough number if we're comparing to prior levels beneath. If we're examining the effects of increasing momentum heading in one direction---in this instance up---then the degree of increasing momentum with a positive bias suggests a continuing surge. This means there's promise of a sort that we'll be moving higher, still. The math is compelling.
I'm thinking we'll hit $20.87 within the next week or two. Don't expect me to explain that as I can't if using conventional fundamentals. But we do know this:
1. We went ex-distribution on August 2. We are fast approaching the mid-way point of this quarter as we draw closer to our next distribution guidance. Given the number of MLP distribution cuts over recent months, NGL seems to be a bit more secure than some others and I spell that "sustained distribution." And if it proves not to be the case, at least the valuation is holding up and even accelerating. Win-win is nicer but I'll take the "win."
2. A number of MLPs have gone belly up one way or another, whether through merger, acquisition or outright collapse. We. on the other hand, have been exploring options designed to create a more stable footing in a precarious environment. And we are succeeding!
3. Some of us are here for the income side. Others want capital appreciation and income both. And then there are those who blow off any mention of income. I'm in the middle group as I need to see both components---income and increasing valuation---working for me in return for the use of my money. The only path I refuse to accept for long is a wavering valuation coupled with no distributions at all. That spells disaster for most companies whose appeal is the promise of income. CVRR, for example---should it pay nothing for the current quarter---will likely drop to the $5 range---UNLESS the company issues a statement stating things should be quite different in the foreseeable future due to X and Y and a bit of "Perhaps we will soon Z improvement." lol
4. Those of us working these MLPs are long accustomed to expecting meaningful income production. With pressures having been brought to bear on the energy sector over the past two years, we've probably narrowed our sights somewhat and now find we will accept smaller distributions if any at all. This is not a good way to go about portfolio management as it becomes dependent upon luck too much for my liking. There are ways to succeed if we remain nimble.
