Below is a brief note from Hedgeye CEO Keith McCullough on why we're adding SemGroup (SEMG) to the short side of Investing Ideas today:
"While it's been entertaining to watch plenty of high profile pundits try to call US stock market "tops" for the last 9 months, it's simply been more profitable to be short "reflation" via levered Energy companies as Oil and Nat Gas prices have deflated.
One of Energy Sector Head Kevin Kaiser's favorite Energy SELL Ideas (Institutional Research Product) remains SemGroup (SEMG) and here's an excerpt of what he wrote about SEMG's recent low quality quarter:
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"SEMG easily needs another $1B to get its balance sheet in proper shape. We estimate that SEMG’s net debt at year end (including the deferred payment to Alinda) will be over $3B, with debt / EBITDA around 8x. In short, material, organic deleveraging is years away (if ever possible), and it will be a grind. What SEMG needs to do is sell assets (SemLogistics and SemMexico is a start), raise equity, and then cut the dividend." |
Sell green,
KM"