Revisit: Linn Energy (LINE): Looks like I made a bad call.

It looks like you can't trust ALL of my "down" calls.

A little over 6 months ago, someone asked for me to check into Linn Energy (LINE) stock.

Here is the analysis I gave at THAT time: http://theinvestoradvocate.blogspot.com/2010/05/quick-analysis-linn-energy-linn.html.

I mentioned, at that time, that I didn't know enough about the industry; however, based upon the numbers that I saw, I would not suggest taking that risk.

Price THEN (5/3/10): $27/share (roughly)
Price TODAY (12/12/10): $36+/share (approx. 30% increase)
Dividend: $0.66/share paid November 2010 (over 7.5% annualized)

Verdict: Don't trust my judgment on stocks within fields that I know NOTHING.

I still would not have the guts to buy this stock, but it seems to be trending upward.

I don't really like the "numbers" all that much. It has more debt than I like (although their debt level seems to be typical within its oil pipeline industry). It seems to be tremendously profitable until it pays debt service (interest on borrowed money) and unexplained operational costs. This tells me that they're inefficient with the money that the business generates.

One thing I LIKE is that they're sitting on a wad of cash. If they use that to buy other pipelines for a cheap price, then this is good. If it's just going to be used to give people unearned bonuses (i.e. Goldman Sachs), I'm not so happy. When you have a pile of cash while having a large amount of debt, you better have a good plan for that money. I don't know whether they do.

Even though their dividend increased 5% from the previous quarter, I think this is a trick. They're paying their stock owners with borrowed money. To me, it's smoke and mirrors.

Plus, since it is a master limited partnership (MLP), you are an "owner," and you receive a K-1, which is like a W-2 for partnerships. This means that you'll pay taxes on a "profit" that you'll never get to touch. This, by the way, is different than the profit you make from buying and selling the stock. It's also different than the dividend payment you receive. (You pay a DIFFERENT tax for that--lucky you.)

Tax stinks! Tax on money you don't really get? That, to me, is the WORST tax to pay--for money you can't ever use.

Still, I proved that I don't know SQUAT about how things work in this oil pipeline industry.