DD - Energy Transfer (ET)

Submitted by DogDaze100 t3_zz4zq7 in wallstreetbets

Energy Transfer is a midstream oil and natural gas company operating largely in the transportation of natural gas in Texas, the Midwest to PA and NY, with certain LNG export capacity. They have a present P/E of 8.8, a 36-billion-dollar market cap, and a 7.3% annual dividend.

Why you should consider buying:

Fundamentals:

ET has been consistently improving their balance sheet while also increasing their quarterly dividend this demonstrates a fundamentally healthy company. Further, ET has made several large acquisitions expanding their network to increase market share both locally and internationally. The present political environment makes construction of new pipelines difficult, however this is an advantage for established companies with existing pipelines. ET has one of the largest pipeline networks in America.

Catalysts:

In 2021 the state of Texas froze. This drove the local price paid for natural gas to all time highs. In addition, natural gas deliveries set new records to supply heating power to the poorly insulated homes and businesses of the Southern US. This resulted in a quarterly earnings beat of 89% over expectations.

This December, the US suffered a similar (albeit less catastrophic) freeze. ET is well positioned to have once again profited greatly, both from deliveries and arbitrage from this event. At present it does not appear that the markets have priced in this freeze as earnings estimates do not appear to have changed, and the stock price remains largely unchanged.

Pattern of Price Movement:

ET for the last 4 quarters has shown a consistent run up in price prior to earnings, then followed by a decrease in price after earnings and prior to the Ex-Dividend date. The most recent run up was to just under $13 per share. At the present price of $11.75, there is a likely 10.5% upside based on this movement. Earnings are expected hit on Feb 15th of 2023. As ET is generally considered a boring, stable, boomer company, IV on options is very low. A Feb 17th $11 call is priced $1.00 with only a $0.25 premium. These options are well positioned to profit off of the usual run up prior to earnings.

TLDR: Buy ET stock and options for the FEB 15th earnings, to capitalize on usual stock price movement, and very possible earnings beat.

Positions:

4000 shares

9 FEB 17th $11 C

15

Comments

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agust2010 t1_j2a28yk wrote

Tldr: ET Phone Home

11

sunshineMNE t1_j29h2sl wrote

Too much to read, this means only yolo ET

8

AltcoinTraderNy t1_j29ibrt wrote

  1. Why do you think it's not priced in ?
  2. The stonk does not have that much movement even with earnings surprise.
5

DogDaze100 OP t1_j29qr7o wrote

  1. Since Dec 9th the stock price has been within a 4% band, trending upward. Even if we assume this freeze event was only half as profitable as the 2021 event we would be expecting a 10% increase.

  2. The price action is generally in the run up to earnings not a post earning spike. As I said in my post price tends to drop off after earning but before the ex-dividend date. As earnings are in Feb and we are near cycle lows now would be a good time to buy low IV options. Even if you ignore the freeze event and the price cycle, last months highs were at $13. It is reasonable to assume that the price will return to those levels for no other reason than it is a well run company.

2

ontrack t1_j29xnhd wrote

I'm a long term holder (13K shares at $9). Dividends (distributions) are sweet. It's considered to be riskier than the ultra safe pipeline company EPD because the founder is known to be a risk-taker so it better fits the profile of WSB. Has a k-1 form come tax season but unless you have a large position this is no big deal.

4

Icy-Garlic7552 t1_j2aahws wrote

I’ve been buying ET since 2019. Raking in the dividends and watching growth. Not always the rabbit that wins the race …

4

DogDaze100 OP t1_j2achap wrote

Same here tho I started in 2020. Tho I wouldn't necessarily say ET is slow. 2022 it's up 44%

1

4troglodyte t1_j29rgbu wrote

I am Long ET with dca of $11.40 and hold time until 2025. I staked out positions in AMT AWK EMN, all at or near 52 week lows, for dividend plays to support my core AAPL position to ride out 2023. I hope to add LNG if their price falls within my target in 2023 as well. Good trading🙏🏻

3

terrybmw335 t1_j2ee6mf wrote

Been holding ET for years. Solid 9%+ yields but they do carry a lot of debt. The 2021 Texas boon was a one off IMHO unlikely ever to be seen again.

3

njsh20 t1_j2a133w wrote

Interesting, bought some shares and just bought my first contract. I've been exploring and considering for awhile and finally pulled the trigger. If I end up Mark Madoffing, I'm blaming you. May the odds be ever in our favor.

2

Rubicon-Tree-Frog t1_j2c79y6 wrote

Thank you for this post!

Been a LONG-time holder of ET. Just been DRIPing my dividends and waiting for it to go up. Someday maybe.

Not a bad play at all.

2

VisualMod t1_j29fiv4 wrote

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^^Discord ^^BanBets ^^VoteBot ^^FAQ ^^Leaderboard ^^- ^^Keep_VM_Alive >TL;DR: Buy ET stock and options for the FEB 15th earnings, to capitalize on usual stock price movement, and very possible earnings beat.

1

bodaflack t1_j2bvrhq wrote

You are very regarded. Pipeline companies don't make the basis on phys deliveries, shippers do.

1

DogDaze100 OP t1_j2bwzds wrote

They do not under normal circumstances, however they do have contracts that require delivery, during periods of high demand, they can and do negotiate with those contract holders to limit their supply, and in turn profit from the redirection of gas.

1

bodaflack t1_j2dthpo wrote

They almost certainly did not have spare capacity outside their firm transport agreements to ship anything themselves. If anything they are more at risk during extreme weather events. Good luck! You could make money, but you'll do it for the wrong reasons.

1