Where the Short Sellers Are Lurking
One of the sources I review each week for MLP intelligence is the MLP Data website. In the most recent issue of their MLP Weekly, they reported that short sellers are adding to their MLP positions. Included was a table of the MLPs with the greatest increase in short interest over the past month:
The article noted that these are mostly MLPs with the greatest commodity price exposure, and those that are expected to issue equity in the current quarter.
I thought it might be of interest to look at the other end of that spectrum. So I ran a screen to come up with a list of the 10 MLPs with the greatest decrease in short sellers’ positions over the past month. Also included in the table are some other financial metrics of interest:
- EV = Enterprise Value in billions as of September 14, 2015
- EBITDA = Trailing 12 months (TTM) earnings in billions before interest, tax, depreciation and amortization
- Debt = Net debt in billions at the end of Q2
- Shares Short = Short percentage of float as of September 14, 2015
- Change = Percent change in the number of shares short over the past month
- YTD = Year-to-date total return
- YLD = Annualized yield based on the most recent quarterly distribution
- CR = Current Ratio (current assets/current liabilities)
Note that Green Plains Partners and CNX Coal Resources both debuted during the year, so some of their metrics are skewed (e.g., EV/EBITDA for GPP).
Year-to-date this group has performed poorly as a result of the weak oil and gas prices that have hit MLPs in nearly every category. The two exceptions on the list are Pope Resources, which is a land and timber owner in the Pacific Northwest, and Rentech Nitrogen Partners, a fertilizer producer that has benefitted from low natural gas prices. The short interest isn’t very high for any of these MLPs, which means investors aren’t expecting much downside from here.
These MLPs come from a range of different categories, and the only pattern seems to be that coal producers are disproportionately represented. Does that mean that investors are betting the sector has bottomed and it may be time to pick up a coal MLP?
While the industry has taken a beating over the past few years, the outlook for coal producers is still dim. The U.S. will remain dependent on coal for many more years, but it is definitely a sunset industry. I prefer to look for winners in sectors with more positive outlooks.