DO NOTHING IS A DECISION
SJR.TO
Finally, I manage to get enough courage to dump this. Remember doing nothing is actually a decision. I have held this thing for more than two years and had only misery. Emotion aside, at best this will be a dead money for a while; At worst, it will have limited growth, more competition to its core product, limited ability to increase margin, uncertainty with new product introduction, higher level of capital expenditure, and diminishing free cash flow. I am certainly not impressed by its management over the years, despite its reputation as a superb operator. Its earning momentum is clearly slowed and it has for all practical purposes, missed two consecutive quarters. But more importantly, the exposures is simply too large for the portfolio to deal with. It is the right thing to do, but man, it hurts.
AE.UN
Pick up some AE.UN (14.85). The trust currently yield approximately 13.05% (net). About half gas, reasonable valuation (5.5 times of CF), D/CF: under one times, P+P RLI about 8.8 years; NAV 12.06 (traded at 1.23 times premium); payout ratio at about 75% and will decline to about 65% by next year. As long as it can maintain at current level, the 13% return is guaranteed for next year. If the commodity price remains at current level, I believe it will go up a little, which will easily translate into a 15% return.
It appeared a number of big misses (MSFT, BCOM, AMZN), and the tech market does not look very promising at this point.
Finally, I manage to get enough courage to dump this. Remember doing nothing is actually a decision. I have held this thing for more than two years and had only misery. Emotion aside, at best this will be a dead money for a while; At worst, it will have limited growth, more competition to its core product, limited ability to increase margin, uncertainty with new product introduction, higher level of capital expenditure, and diminishing free cash flow. I am certainly not impressed by its management over the years, despite its reputation as a superb operator. Its earning momentum is clearly slowed and it has for all practical purposes, missed two consecutive quarters. But more importantly, the exposures is simply too large for the portfolio to deal with. It is the right thing to do, but man, it hurts.
AE.UN
Pick up some AE.UN (14.85). The trust currently yield approximately 13.05% (net). About half gas, reasonable valuation (5.5 times of CF), D/CF: under one times, P+P RLI about 8.8 years; NAV 12.06 (traded at 1.23 times premium); payout ratio at about 75% and will decline to about 65% by next year. As long as it can maintain at current level, the 13% return is guaranteed for next year. If the commodity price remains at current level, I believe it will go up a little, which will easily translate into a 15% return.
It appeared a number of big misses (MSFT, BCOM, AMZN), and the tech market does not look very promising at this point.
posted by ZIGZAG at 10/21/2004 11:56:00 AM
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