Kiplinger’s on Crosstex Energy LP
The December issue of Kiplinger’s Personal Finance magazine has an interesting article on finding value in today’s current market. Specifically, the article mentions the rapid decline in commodity prices (such as natural gas) as speculators flee investments in the energy market due to weak demand.
As a result, some pipeline companies (which actually have limited exposure to these prices) have unduly suffered. For example, Crosstex Energy LP (XTEX) has fallen over 70% since July - even though it has continued to grow cash distributions to investors. While it had a rough 3rd quarter due to major Hurricanes, at a price of $8 Crosstex has a whopping 25% distribution yield! However, I like to see a coverage ratio close to 1.3x - Crosstex is below this benchmark with a coverage of around 1x. Still, bottom line is the same - the market is likely undervaluing some of these companies as commodity prices fall.
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