Today's 10% Ginnie Maes, right in front of our noses

I wish I had a nickel, no maybe $10,000 for every time I heard someone say,” I wish I had bought those 10% Ginnie Mae bonds back in the day…”  (GNMA Bonds are guaranteed by the full faith and credit of the U.S. Government) Well, that Ginnie Mae may still be here, staring us right in the face in the oil and gas and particularly MLP market.  Many MLPs in the oil and gas infrastructure business are selling with yields from 8.5%-15%  No, it’s not guaranteed but then again interest rates aren’t at near 0% either.  We put together a list of these names where insiders have been buying their own stock like crazy.  It’s the only place in the entire market where you finds any animal spirits.  Almost every other insider is unloading their stock.

We sorted this list  by yield.  I would throw out the first few as a matter of fact as yields of 84% are not sustainable or for that matter maybe it’s already reflected in the distressed price.  Obviously some of these insiders wish they had never bought their own stock but I have to give them credit for at least having their heart in the right place.   You can bet I’ll be drilling down on many of these names to make sure how credit worthy their fee based customers are as oil could stay depressed in price for quite some time.  Eventually though I believe the market will settle out and we will keep using hydrocarbon products with gradual decline due to alternatives maybe even offset by population or emerging markets growth.  At any rate there will be a continued demand to transport this stuff whether it arrives  in by tankers, rails or pipelines.  These companies find it, move it, store it, refine it, sell it and some of them will weather the storm.  In fact I don’t ever recall a major MLP going bust even.

Bear in mind, that this list is just a first screen and no MLPs will be able to cover their distributions if all their customers go bust..  Well even that is subject to debate because in bankruptcy there is such at thing as essential vendors so the creditors can still get something for their money by operating or liquidating the business.  Most pipeline companies should get paid something by the court even if their customers are in Chapter 11.