Tom's Life Bits

There are stats that I calculate that expose more of my thinking than I want to have exposed - so I do not show them often. At year end - and being almost fully invested - I had decided to share those stats. I really hope that most of you do not go to the effort to understand them - and that most of you believe this is a bunch of voo-doo math that will never work in the real world. That is partially a correct impression - because I will show that the stats are only about 70% predictive and 30% in error.

Given that the statistical analysis is NOT the end of my investigations - and not the sole determinant of my investing decisions, I can live that with level of error. The statistical analysis is just the beginning - it highlights what MLPs I want to investigate further.

And the first step in generating predictive numbers is to generate good forward CAGR [compound annual growth rate] numbers. The first spreadsheet shows where I get those numbers - and why the numbers I use differ from the CAGR estimates the one can find at Yahoo! Those numbers are in the next message.

MLP CAGRs - Why Consensus Estimates Are Not Used

  The dominant factor in assigning amended CAGRs is the distribution coverage ratio, with forecast DCF growth second and recent distribution growth third. My CAGRs are close to the analyst estimates - with only a few exceptions.

Consensus 	2005-08 	2005-08 	2005-07 	LTM 	2008 Est. 	Site 	

Co. CAGR Est. EPS/yr DCF/yr Dist/yr Distrib DCF/Dist CAGR Explanation

Dec 	Nov 	Oct 	Growth 	Growth 	Growth 	Growth 	Ratio 	

APL 6.0 6.0 5.0 18.76% 5.84% 6.17% 7.06 117.86 6.5 Slow dist growth BPL 8.0 8.0 9.3 4.99% 3.66% 6.90% 6.45 113.33 6.2 Low DCF growth/good dist history BWP 8.0 5.7 7.0 17.06% 16.87% na 12.50 138.89 9.0 Strong DCF growth CPNO 12.3 10.0 10.0 19.33% 15.74% 44.00% 25.33 140.96 11.0 Shrinking DCFs Growth? DEP 7.8 7.8 8.2 na na na na 118.29 7.0 Approx Lehman Estimate DPM 9.2 9.2 7.8 -2.82% 6.79% na 35.80 145.00 10.0 Newbie with strong coverage EEP 5.0 5.0 4.7 17.59% 7.99% 0.00% 0.00 121.62 5.0 Bad distrib growth history EPD 9.5 9.5 8.6 13.95% 7.47% 6.98% 6.52 114.29 8.5 Good EPS & DCF growth ETP 7.0 7.0 7.3 26.37% 21.80% 32.50% 10.00 131.82 8.7 Cut due to FERC uncertainty EROC 29.5 30.7 24.5 na na na 1.38 153.06 9.0 Strong DCF & EPS growth GEL 22.7 8.0 8.0 49.52% na 34.38% 35.00 183.33 11.5 Good dist/DCF ratio HEP 6.3 6.3 6.3 13.71% 10.20% 9.58% 7.52 116.43 7.0 Low coverage w/ good growth HLND 15.1 15.1 10.7 11.68% 24.06% 23.59% 7.86 151.66 10.5 Strong coverage & DCF growth KMP 7.6 7.6 6.8 -3.49% 6.39% 5.70% 8.64 113.07 8.0 Kinder said 8% on 12-14-06 MMP 7.4 7.4 6.8 11.11% 11.25% 10.59% 9.11 123.11 8.0 Good DCF growth - fair coverage MWE 13.4 10.9 6.5 128.28% 19.96% 17.07% 13.40 135.91 11.0 Great DCF growth and coverage NGLS 11.8 11.8 11.5 na na na na 170.62 11.5 Newbie w/ Good Dist/DCF Ratio NS 5.8 5.8 6.7 6.06% 8.35% 7.60% 7.65 127.92 7.0 Average DCF growth and coverage OKS 6.0 6.0 6.2 15.67% 9.59% 13.12% 4.12 116.34 6.0 Bumpy DCF & dist growth PAA 5.5 5.4 9.1 -4.62% -3.94% 12.22% 12.00 117.56 7.0 No DCF Growth in 08 & 09 RGNC 12.4 12.0 10.0 49.33% na na 5.41 158.97 9.5 Slow prior dist growth SXL 5.7 4.3 4.3 12.07% 7.32% 12.96% 7.94 109.41 4.5 Good DCF, but poor coverage TCLP 5.0 5.3 5.3 -1.05% 14.09% 7.39% 10.00 132.58 6.5 Poor history/Decent future? TLP 7.0 7.0 6.0 10.42% 22.80% 12.50% 16.28 146.50 10.2 Great DCF growth & coverage TPP 5.0 5.0 5.1 5.56% 3.60% 1.48% 2.96 110.79 4.0 Low growth & fair coverage EXLP 12.5 12.5 11.7 na na na na 129.37 10.0 Strong DCF growth & coverage WPZ 10.5 11.0 13.6 na 34.44% 41.67% 22.22 138.64 11.5 Strong DCF growth XTEX 7.0 7.0 7.5 -22.50% 7.15% 10.20% 7.27 112.71 7.0 Shrinking DCFs KSP 8.5 8.5 8.0 50.53% 19.51% 9.65% 6.25 143.38 8.5 Lumpy DCF growth MMLP 8.5 8.5 8.0 4.92% 8.96% 9.65% 11.48 125.00 7.0 Good growth & coverage TGP 8.7 8.7 7.6 25.30% 16.48% 14.24% 14.59 122.64 9.0 Strong DCF growth/good coverage USS 3.2 3.2 3.2 -32.13% -23.42% 0.00% 0.00 30.56 2.5 Low growth/no coverage