StoneMor Partners L.P. (NYSE:STON)

CAPS Rating: 3 out of 5

The Company is an owner and operator of cemeteries in the United States.


Player Avatar TSIF (99.96) Submitted: 12/1/2011 1:14:42 PM : Outperform Start Price: $16.23 STON Score: -4.72

One of the MF services recommended StoneMor Partners L.P. the end of July. Since it's a low volume equity, I put it on my watchlist and thought I'd check back in after the spike decayed somewhat. It flared on my watchlist after the last two day selloff and I'm checking back in.

The articles in July mirror closely the article by Alex Page on August 19th that is now part of Fool public record so I can refer to it.

Alex ponts out how StoneMor's business from a financial perspective is not well understood by the markets. StoneMor deals in funeral services from plots, perpetual care, funeral needs such as headstones, caskets, cremations etc. Cashflow in particular can be difficult to follow due to accounting requirements that Alex outlined very well.

This left the 8% plus dividend as a premium for investors and an argument that the share price could appreciate if investors caught on, if not you get a larger dividend.

One problem is that if a company is difficult to explain, even if you explain it to a few and they either get it, or go out on faith as some MF subscribers do, there is still a vast majority of investors left who will stay away.

StoneMor Partners L.P. "crashed" hard the last two days as S&P down rated their credit worthiness. Moody's is holding theirs. The cash flow has become an issue as StoneMor puts much of it's receipts in escrow as it's advance payment. Perpetual care expenses also leveraged interest from the escrow accounts which is at a minimum.

Matt discusses the steep selloff in this Fool Article.

While I wasn't interested in StoneMor last July at the $28 entry price, I am an opportunist and low volume equities that start triggering stop losses can be opportunities. There is, however, the issue of trying to catch a falling knife and it typically takes 2-3 days for settling to occur. In the case of low volume equities, however, stop losses may escalate into a territitory that won't be repeated unless there is more negative catalyst piled on.

I actually wish I'd ran faster and put in a $21 RL limit order yesterday when this started dropping. You shouldn't try to catch a falling knife, but if the risk is low, you have some bandaids on hand and some surplus blood left over from Halloween then sometimes it's worth a stake in the ground, or a casket. The overall industry is recession proof!

Upside back to mid-$20's and will evaluate.

Report this Post 2 Replies
Member Avatar chopchop0 (58.17) Submitted: 12/1/2011 2:35:44 PM
Recs: 0

I bought at 23.9X today IRL. Hoping that value investing and the fact that I can buy it cheaper than most fools will pay off. It really has seemed like a solid stock until now with a steady, increasing payout.

Member Avatar sophistabubba (78.03) Submitted: 12/1/2011 8:42:25 PM
Recs: 0

I have followed this one for quite a while and target a 9% yield for purchases and typically sell for capital appreciation. It has been quite a while since the market offered it up at a 10% yield. With a long-term favorable demographic trend starting in 2013, I loaded way up today as I see it as a quick substantial gain . Worst case scenario, I see it as a long term safe 10% return.

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