Bargain Hunting the MLP’s

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While it is not new news to many of you MLP’s (Master Limited Partnerships) provide weekly opportunities for some bargain hunting and some quick profits.

We are not ‘traders’ in any traditional sense, but we certainly are not adverse to letting someone hand us a ‘gift’.  The potential gift we are referring to is the irrational reaction of MLP holders when a new common unit offering is announced–the ridiculous selling of shares that occurs.  Now we know that MLP’s will have ongoing offerings on a continuous basis (and this holds true for REITs as well)–so when they come why get bent out of shape with silly selling.  A good share of the time the selling only lasts for a day or two and then the shares bounce right back up to recover a fair amount of the loss from the previous day or two.

Let’s look at our best recent example.  Memorial Production Partners (ticker:MEMP), a exploration and production MLP.  On July 9th MEMP announced a public offering of common units–a good sized offering of 8.66 million units with 1.29 million over allotment shares.  The 1st press release announcing the offering hit the wires at 4:09 pm on the 9th–just after market close.  This is typical timing for these announcements.  On Thursday the 10th the shares opened at $22.15/share (down $1.77) and traded in a relatively tight range of $22.07-$22.38, closing at $22.20.  On the 11th shares closed at a price of $22.83 and today the shares closed at $23.15.  Below is a 5 day chart for MEMP.


Needless to say one could have picked up a quick $1/share if you would have bought anytime during trading on the 10th.

To help facilitate those that would like to possibly utilize this quick ‘flipping’ technique we have added a column to the MLP pages which highlights any issue that trades down by more than 3% during the course of a given day.  One should quickly skim the page for the issues highlighted and then check the company website for new news.  Of course issues move for reasons other than common unit offerings and one must do some quick due diligence to find out why shares have moved.

Common sense is required to use this technique and one should not get greedy trying to ‘get rich quick’.  We typically would buy $5,000 to $10,000 worth of shares (300 to 500 shares) and would be most happy to sell for a dollar gain.



Tim McPartland

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Tim McPartland
Tim McPartland is a private investor with over 45 years of investing experience. His analysis, research and writing is devoted to the hunt for income producing securities of all types, but in particular specializing in preferred stocks, exchange traded debt and Master Limited Partnerships.
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