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Behind Midstream Stocks’ Latest Returns and Implied Volatility

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Midstream stocks with high implied volatilities

Teekay LNG Partners (TGP) stock has risen 55.5% in the past year as of April 4, 2017. TGP is the Alerian MLP ETF (AMLP) constituent with the highest implied volatility, as we discussed in Part 1. And in the past five days, TGP stock has risen 2%.

The above table shows the one-year and trailing-five-day returns of the stocks we’ve identified as having high and low implied volatilities (see Part 1). As you can see in the above table, high volatility stocks have moved more sharply than low volatility stocks in the past year as well as in the past five trading days.

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NGL and peers

NGL Energy Partners (NGL) rose the most among the midstream stocks with high implied volatilities in the past five days. Wall Street expects NGL to report a profit of $0.85 per share for the quarter ended March 2017. The company is expected to report its earnings for the quarter ending in March 2017, on May 26, 2017. Rice Midstream Partners (RMP) has risen the least in the past five days.

NGL Energy Partners (NGL) also has risen the most in the past year among the midstream stocks with the highest implied volatilities. Over the past four quarters, NGL Energy Partners’ revenue has fallen 26.9%, while its operating profit has fallen 66.4%. Its operating profit margin is now at 0.5%.

Teekay LNG Partners (TGP) has risen the least in the past year among the midstream stocks with the highest implied volatilities. Over the past four quarters, TGP’s revenue has fallen 2.7%, and its operating profit has risen 6%. Teekay LNG Partners’ operating profit margin is 48.4%, as compared to the industry median of 4.9%.

Returns of midstream stocks with low implied volatilities

Among the midstream stocks with the lowest volatilities, Spectra Energy Partners (SEP) is the only loser in the trailing-one-year period. In the past four quarters, SEP’s revenue has fallen 4.6%, while its operating profit has fallen 0.6%. Its operating profit margin is now at 48.5%.

Remember, high short interest in a stock can reflect the market’s expectation of a large fall, while expectations of large movements in a stock can cause its implied volatility to rise.

Continue to the next and final part of this series for a detailed look at the midstream stocks with the highest short-interest-to-equity-float ratios.

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