Friday, September 28, 2007
Fly Buy: XFML
Disclaimer: If you buy XFML because of this post, then "Joe" is God. And, you may lose money.
It seems like the word "Solar" was mistakenly dropped from it's name.
History says these types of situations do not end well.
Lots of money can be made while the mania-market maintains, but be quick to take profits should the tape go against you.
this will give you an idea
Folks : I know i beat the drum to buy it from $20 to $120 and i know i beat the drum to sell it from $125 to $100 and many of you keep asking me about it so here's the answer .
Its ridiculously overpriced . Its the classic case of an unknown/unfollowed stock that stumbles out of the dark ages into a hot sector and has very little float or intelligence . Its a daytraders dream as folks go to chat boards searching for info .
TNH is an MLP . It was spun off by TRA back in 1994 . Its a single factory that churns out nitrogen based fertilizer product ( UAN and ammonia byproduct ). TRA retains 75% ownership (needed to control an MLP vs 50.1% for a corp) and is the general partner running TNH . Because they lost money a few years back , profit sharing dropped to just 1% until losses in past were earned back . Those losses are getting close to being earned back and then profit sharing soars in TRA favor with the big number being 50% of everything over $1.045 cents . Please refer to their last 10-Q where TRA management reposted this ancient profit split info because they know TNH is silly expensive too and want to avoid getting sued later . As an aside , TNH runs at 100% production all the time so it can't produce more and if NatGas soars , its margins can crater ( yes , this $130 stock traded at $3+ 5yrs ago )
TNH will probably cover the deficinecy by Q1 2008 .
I see folks on chat boards referring to TNH as a 'locked in $12 dividend forever' and a way to cash in on the agriculture boon . They see CF up from $17 to $75 in last 52 weeks , TRA from $7 to $31 , and see no reason why TNH should not run from $20 to $130 .
The problem of course is that TNH is no different today than it was at $3 . That plant can be replicated by a competitor most anywhere NG is available . It doesn't trade to value of the plant but rather to perceived yield of $12 in divvidends forever which at $130 gets you 9.2% .
The problem of course is that $12 will drop to more like $7 once the new profit split kicks in . To get 9.2% yield there , price drops to $76 . Even there , everything must remain PERFECT . That is to say , natural gas needs to stay dirt cheap and prices for fertilizer stay very strong ( but not too strong or foreign producers who can buy NG alot cheaper might ratchet up production ) .
My position has not changed . I have on a slight short that is slightly underwater . Prices for UAN are on the moon and they might earn $3-4 this quarter ....maybe more . But all this does is potentially push up the date the profit split changes radically AGAINST shareholders of TNH .
Its a daytraders dream but i suspect 3/4 have no clue of underlying fundamentals . I shifted to POT awhile ago and now have a single large position in MOO whose biggest position is POT as a more diversified play on ag sector .
For those of you arguing that even at $6-7 , TNH is worth $130 , i suggest you do some DD on MLP sector . Even at $7 dividend , thats a 5.3% yield . The sector has has greatly cheapened since credit crisis . Highly rated and well run MLP like LINE are now trading at 7.3% yields . Many other good ones backed up to 7% area and i hear there are about 10 MLP deals backed up on IPO dockets just waiting for a break to price . MLP like LINE run heavily hedged while TNH is mostly unhedged ( ie sell UAN at spot and only hedge 25% of their NG needs ) . For that reason alone , TNH should trade to a higher yield to reflect dividend volatility .
TNH is trading in an agricultural induced rally overlaid on a void of information and i suspect heavily owned by coupon clippers believing that $3 quarterly dividend is as secure as a Treasury bond . They are wrong but maybe they won't know it until later in 2008 when they announce good earnings but a divvy half of what was expected gets paid .
Until then , it goes wherevever the fight between the daytraders and the shorts push it . With a YoY change in avg daily volume going from 27k shares to 638k shares , short interest ratio is under 2 . There will be some short traders that will make a killing in TNH but when is the $64 question .
Position: slightly short TNH but at $140 , that will grow larger .
Throwing darts at Steve Jobs' picture worked out pretty well.
Do or die time for NTRI right here.
Last month's low candle body bottom: $46.55
Wick (absolute, intraday) low: $46.50
From my bitter Met-fan college roommate:
(sung to the tune of "Meet the Mets")
Beat the mets, beat the Mets
Last place teams defeat the Mets
Hanging sliders, minor-league speed
Guaranteed to waste a seven run lead
Because the Met bullpen keeps fading away
October baseball won't be at Shea
Every game is now in doubt
Can anyone who's on this staff
Get three men out?
With a lying weasel like Bill Clinton on it's side, how can it fail? And the CEO is a woman. putty in his hands.
And spew on her chin.
Just bustin your chops - nothing but love for ya. I just had to give you a hard time for stooping me on the God thing. Long live irrational religious beliefs and long live XFML!
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