What: Shares of Star Gas Partners LP (NYSE:SGU) declined close to 15% in the month of September as it got dragged down by the broader energy and master limited partnership sector. Whether Star Gas deserved that decline is an entirely different question.
So what: Star Gas Partners and almost all companies in the energy or MLP space were running against the wind last month. Oil and gas prices have remained rather low and the possibility that several companies will have their creditworthiness reevaluated soon has put much of the entire sector out of favor.
This is what makes it so intriguing for shares of Star Gas: Neither lower oil and gas prices nor credit issues are major factors for the company. As a fuel distributor and service provider to residential and commercial customers, Star Gas benefits from lower prices because it is on the downstream side of the business. Yes, it will impact revenue, but as seen in its most recent quarterly report, its cost of goods sold declined even more. Furthermore, with only $2 million in net debt -- cash minus short- and long-term debt -- there aren't any real pressing issues related to its current solvency or liquidity.
Now what: The reasons for the plunge in Star Gas' stock have little to do with the prospects of the company. So, going forward the thing investors need to watch to roughly gauge Star Gas' results is the weather, most notably the degree days of heating that are needed. Since most of Star Gas' fuel distribution is for heating services, unusually cold or warm weather can weigh heavily on how much its clients need its services.
That being said, this past month's weakness with very little link to the company's business prospects suggests that today is an opportunistic time to take a look at Star Gas Partners and possibly pick them up at a small discount.