Everyday You Aren't Selling You Are Buying

I am often asked if I still own a security that I've opined on. If the answer happens to be "yes", I often find myself issuing a disclaimer such as "but I'm not adding to my position at present". The implication is that it is no longer a bargain, therefore I'm not adding. But, by not selling, I am making the same decision as buying. So, I must continue to like the company at its current valuation. I found it more compelling when it was cheaper, but evidently I would buy it today if I still own it. I find myself going through this circuitous logic regularly.

Two Master Limited Partnerships, DEP and EPD, have prompted my introspection. These two mid-stream oil and gas service partnerships have been stellar performers. Now, selling at all time highs I wonder if they shouldn't be sold. They aren't selling at ridiculous valuations, but they are getting extended, especially the bigger of the two, EPD. DEP's multiples are more reasonable. At today's pricing they will still yield about 5.5%, not all dividend income as some is return of capital. Both are growing, adding assets, and well managed.

Dan Duncan, the founder and force behind both companies died near the end of 2010. He left the companies with a capable cadre of management and his heirs a nice bonus, zero estate tax on his 10-20B estate! I liked him when alive, admire his timing in death, and plan to keep his two companies for the foreseeable future. I'm not selling, so I guess I remain a buyer.

It Never Hurts To Ask The Question

Bunge is up $4 this morning, for all the wrong reasons! It's not their repositioning from fertilizer to sugar and ethanol. It isn't the valuation metrics that are much improved since the share price has come down from the lower 70s. It is due to last evenings announcement of a $700 million stock buyback program. An authorization that may, or may not, be used to its fullest authorized extent. It's a wonder I make any money at all since my thinking is sure different than many on Wall Street.

I've also been questioning myself on my Smart Balance position. I'm currently into the second year of my estimated 5 year holding program on this venture. SMBL doesn't have a fortress balance sheet or a sterling earnings performance, but it is building a great brand and someone, over time, will take it out. Management has done this same gig many times, all successfully. They will again and lots of money will be made. But it was a lot easier staying true to my thesis when the stock was several dollars higher. The market has taken the company steadily lower over the past month and I am now only slightly over my basis. SMBL is a bet on management and mangement is still on the job. I'll continue to wait even though those smarter than me continue selling. I could be wrong, but as Charles Barkley says, "I doubt it."

Natural gas companies have been more in demand lately. Devon, a company like Bunge that has largely liquified its balance sheet and changed it's emphasis from offshore oil to gas, has been doing nicely. The safer side of a Devon investment is some of the pipeline Master Limited Partnerships, guys that get paid for carrying the product. Names like EPD and DEP are down, but still yield 7%. They are a reasonable place, in this low interest rate enviroment, to have some exposure, especially as the country moves to a more natural gas environment.

Time to quit typing, get another cup of coffee, it's too early for scotch, and see what the market is doing to me. Am I smart or stupid?