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Bearish Midstream Stocks: Do You Own Them?

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Midstream stocks with high short interest

EnLink Midstream Partners (ENLC) has a short-interest-to-equity float ratio of 10.1%, the highest among all of the midstream companies in the Alerian MLP ETF (AMLP).

In the past three months, EnLink Midstream has risen 8.9%, while its short-interest-to-equity-float ratio has risen 30.9%. The company’s net-debt-to-EBITDA (earnings before interest, tax, depreciation, and amortization) ratio is 4.3x.

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ENLC’s short interest rises ahead of earnings

In the past four quarters, EnLink Midstream’s revenue has risen 14.9%. Its adjusted operating profit was $38.3 million in 4Q16 compared to an adjusted operating profit of $74 million in 4Q15.

High short interest in a stock can be reflective of the market’s expectation of a large fall. Expectations of large movements in a stock can cause implied volatility to rise. EnLink Midstream was among the high implied volatility stocks we discussed in part one of this series.

Phillips 66 Partners

On February 17, 2017, Phillips 66 Partners’ (PSXP) short-interest-to-equity float was 9.4%. Its net-debt-to-EBITDA ratio was 3x. In the past three months, Phillips 66 Partners stock has risen 28.7%, and its short-interest-to-equity float ratio has risen 273.8%. In the past four quarters, Phillips 66 Partners’ revenue has risen 121.7%, while its operating profit has risen 67.8%. PSXP’s operating profit margin is 63.3%.

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Boardwalk Pipeline Partners

Boardwalk Pipeline Partners’ (BWP) short-interest-to-equity float ratio is 8.2%. Its net-debt-to-EBITDA ratio is 4.6x. In the past three months, the stock has risen 6.2%, and its short-interest-to-equity float ratio has risen 130.7%.

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 35.2%.

Energy Transfer Equity

Energy Transfer Equity’s (ETE) short-interest-to-equity float ratio is 7.6%. Its net-debt-to-EBITDA ratio is 7.9x. In the past three months, the stock has risen 14.3%, while its short interest-to-equity-float ratio has risen 46.4%.

In part two of this series, we discussed ETE’s earnings trend. ETE is expected to announce its 4Q16 earnings results on February 22, 2017. ETE was among the high implied volatility stocks we discussed in part one of this series.

Dominion Midstream Partners

Dominion Midstream Partners’ (DM) short-interest-to-equity float is 6.4%. Its stock has risen 33.3% in the past three months, while its short-interest-to-equity-float ratio has risen 43.3%. Its net-debt-to-EBITDA ratio is 1.0x.

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 57.1%.

Interestingly, all of these midstream companies’ stocks have seen short interest in them rise as their prices have risen, which could indicate trader skepticism around their ascent.

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