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Swimming with Fire: Implied Volatility and Short Interest in Midstream

PART:
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Part 3
Swimming with Fire: Implied Volatility and Short Interest in Midstream PART 3 OF 3

These Midstream Stocks Have the Highest Short Interest

Midstream stocks with high short interest

On March 13, 2017, EnLink Midstream Partners (ENLC) had a short-interest-to-equity float ratio of 10.1%—the highest among the midstream stocks in the Alerian MLP ETF (AMLP).

These Midstream Stocks Have the Highest Short Interest

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In the past three months, EnLink Midstream has risen 4.9%, while its short-interest-to-equity-float ratio has risen 7.1%. The company’s net debt-to-EBITDA (earnings before interest, tax, depreciation, and amortization) ratio is now 4.3x.

Revenue, operating profit, and high short interest

In the past four quarters, EnLink Midstream’s revenue has risen 14.9%, but its adjusted operating profit fell 48.2%. Its operating profit margin is at 5%, as compared to the industry median of 4.7%.

Remember, high short interest in a stock can reflect the market’s expectation of a large fall. Any expectation of large movements in a stock can cause its implied volatility to rise. (EnLink Midstream was among the high implied volatility stocks that we discussed in Part 1 of this series.)

Phillips 66 Partners

Phillips 66 Partners’ (PSXP) short-interest-to-equity float ratio was 9.4% on March 13, while its net debt-to-EBITDA ratio was 4.3x. In the past three months, Phillips 66 Partners stock has risen 12%, while its short interest-to-equity float ratio has risen 215.2%.

In the past four quarters, Phillips 66 Partners’ revenue has risen 121.7%, while its operating profit has risen 67.8%. Its operating profit margin is now 63.3%.

Boardwalk Pipeline Partners

Boardwalk Pipeline Partners’ (BWP) short-interest-to-equity float ratio is now 8.2%, while its net debt-to-EBITDA ratio is 4.4x. In the past three months, the stock has risen 2.6%, and its short interest-to-equity float ratio has risen 168.8%.

In the past four quarters, Boardwalk Pipeline Partners’ revenue has risen 8%, while its operating profit has risen 28.4%. Its operating profit margin is now 35.2%.

Energy Transfer Equity

Energy Transfer Equity’s (ETE) short-interest-to-equity float ratio is now at 7.6%, while its net debt-to-EBITDA ratio is 7.8x. In the past three months, the stock has risen 8.5%, while its short interest-to-equity-float ratio has risen 56%.

In the past four quarters, Energy Transfer Equity’s revenue has risen 13.3%, while its operating profit has risen 32.3%. Its operating profit margin is now 8.6%. (Energy Transfer Equity is also among the high implied volatility stocks that we discussed in Part 1.)

Dominion Midstream Partners

Dominion Midstream Partners’ (DM) short-interest-to-equity float is now 6.4%. Its stock has risen 13.3% in the past three months, while its short-interest-to-equity-float ratio has risen 32.4%. Its net debt-to-EBITDA ratio is now at 2.8x.

In the past four quarters, Dominion Midstream Partners’ revenue has risen 114.6%, while its operating profit has risen 51.5%. Its operating profit margin is now at 57.1%.

Notably, all of these midstream companies saw the short interest in their stocks rise as prices rose—a trend that could indicate market skepticism.

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