Good points you're making---Value N Investor and fretgenie, both. Much appreciated by all here, myself included.
What a lot of people may not recognize is that some index changes are in place to better able concerned individuals to grasp a picture larger than individual stocks with their personal histories may provide. We on the retail side will usually do better by ignoring such information as we place far more emphasis on instinctual responses than on quant-driven investor approaches (including high frequency trading entities) in addition to fundamentals and technical analysis.
Institutional investors have their sets of rules and bylaws governing their investment vehicles. They absolutely must subscribe to these in all situations. We, on the other hand, take into account a broader array of informational bits we find more alluring. This most certainly applies to NGL.
In my opinion, it would be an egregious mistake to discount NGL's actions over the past couple of months. Selling off the retail propane division is just one piece of it---a defensive piece at that. Equally important is the bottom line net effect (s) of unloading that ultra- high risk part of the company's business model.
By focusing on the most profitable parts of the company's focus, company energies (labors, money, plans, and more) we reposition ourselves for not only lower risk to cash flow and distributable cash flow (think sustainable distributions), but increasing capability to self-fund without finding itself at the mercy of capital markets. Anybody who's gone with hat in hand to a local bank in the hopes of obtaining a mortgage on the new house or loan for a vehicle will relate to this. When we owe, THEY own....and they own US! MGL has moved out of this death-spiraled-enabled cauldron and now finds itself fairly unique in not having to beg.
So much for the defensive side. Let's now look at the other side of the equation:
NGL has been flexing some exciting muscle. Call it "aggressiveness."
It may have begun with the propane sale but then we quickly learned it amounts to a lot of repatriated money---money to be used to tighten the balance sheet over-fat with debt. Looking at the most recent issuance of ledger-related numbers and debt is waaay down in comparison to June's released information. These details are readily available at the company website.
Purchasing two ranches in New Mexico is a dramatic move, to be sure. I'm betting very few individuals out there recognize this as huge opportunity to enhance our bottom line. That will change in time Prodding increased awareness will probably result from the posting of information via PRs relating to the erection of water disposal stations on the 122,000 acres we unitholders now own. These will have to be tied into pipelines located in our basins of concern. We already enjoy many miles of connection and more are being designed and planned now as things come together.
Applying about a third of a billion $$$ towards debt obligation several years out from here? That, my friends and fellow investors, amounts to a vision of excellence readers at Heaping Crapper will choke on, you'll see. Buying ranches, increasing focus on water and logistics---these are nice. But money talks louder than designing plans. Remove the worst obstacle to distribution sustainability of all and it will be debt---every single time!
Pulling all this together---it may take a quarter or two after this one but I see NGL moving into its own space of excellence while many other MLPs flounder.
As for next week? I think we'll drop back on unit pricing, perhaps down to $11.00. This is to be expected after a Friday surge that caught most of us by surprise. But as the clock continues ticking closer and closer towards distribution-driven guidance, we will find downward pricing pressure abating.
I want another 100 units of NGL this week. It will bring me up to 47,500 and a cost basis of $10.20. Our next distribution will drop the CB back under $10. That will be a first for me and I'm excited.
Last item:
Most investors don't examine things as carefully as do we. And they may make a lot of money doing as they do so I won't denigrate them for their stylistic differences. We, on the other hand, scrutinize every last detail and pool our ideas and interests here. I personally derive a great amount of my courage through this so I thank you all for your participation.
