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 BuffettJunior1 (97.61) Submitted: 12/11/2011 8:03:34 PM : Underperform Start Price: $25.26 STON Score: +9.01

This is an extremely overvalued stock! I was surprised to see how many people have this as outperform. The company has had declining free cash flow for many years. In fact, free cash flow was negative last year. However, during this same time the company has steadily increased its dividend. The only reason the company was able to sustain the dividend is because they took on more debt and sold stock. Now, I don't know about you people, but to me this raises a red flag. The question is not whether or not the company will sustain this dividend, but when they will be forced to cut it. And trust me; the dividend is the only thing keeping the stock price up. When the dividend goes, which it surely will, so will the shareholders.

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Member Avatar jdwelch62 (33.57) Submitted: 1/5/2012 1:39:58 PM
Recs: 0

You're missing the point about how they have to report their revenue per accounting regulations. Please refer to this article, which explains their actual strength in supporting their distributions:

Also, keep in mind that STON is an MLP, so they have to return as much as possible to their "shareholders".

Member Avatar neilepi (< 20) Submitted: 1/5/2012 5:41:00 PM
Recs: 0

2 Articles to take into consideration.

The first re insider purchases - "On Tuesday, StoneMor Partners LP (STON)’s Director, Robert B. Hellman Jr., made a $10,006 buy of STON, purchasing 423 shares at a cost of $23.66 a piece. Bargain hunters are able to grab STON even cheaper than the Director did, with shares changing hands as low as $22.47 in trading on Thursday which is 5.0% below his purchase price. Before this latest buy, the Director purchased STON at 5 other times during the past year, for a total cost of $49,971 at an average of $27.72 per share. In the past twelve months, 2 other insiders bought STON, in 3 transactions, for a total cost of $259,492 at an average of $23.81 per share."

The second is even more important, it is a Forbes article from the last few days: "Paul Maher: I want to disclose that I am long these positions on behalf of my clients, and the other is I’m not making a recommendation to anybody else.

I have a lot of favor in a position called Stonemar Partners (STON). It is a recession-proof industry. It is in the mortuary and cemetery business. They are again a limited partnership.

They have an awkward relationship with the IRS. The rules for the IRS make their fundamentals—if you’re not looking them as a partnership, limited partnership with a distribution characteristic, it’s hard to read that this company can afford to pay its dividend.

But when you do the proper research, you find out that this position has a great deal of assets that can’t get shown, because they have to wait at least a year for a certain percentage of them to be allowed on the books, even though they’ve already collected the money. And then they have to wait until the product is used when the client dies, or when they make up a selection for a specific whatever.

Kate Stalter: Interesting business model."

"Paul Maher: Yeah, it very much is. The nature of their business allows them to leverage against assets that can’t be shown on their 10Ks and their 10Qs, because IRS rules don’t allow it.

They are growing so fast that it looks like they’re outreaching sort of their logistical line. Their ability to supply their growth is accomplished on the debt side, but it’s very carefully collateralized against assets that aren’t allowed yet to be shown as assets.

A limited partnership that’s not growing…this process would catch up with itself, and it would look OK on the books. But when a company like this particular company, Stonemar, grows as fast as it does, it’s harder to see it. It’s a bit underappreciated.

It goes through a little more volatility than I tend to like, but I’m there for my clients to earn a distribution, and that’s what we’re doing. That’s a really interesting one, if you’ll forgive me for saying so."

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