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mode7 (96.30)

Need some stock advice on CEP and EXM

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August 31, 2009 – Comments (3) | RELATED TICKERS: EXM , CEP

So, I bought CEP before earnings (first week in August) and lost like 15% in a day when they bombed; fair enough, my mistake for buying before earnings. I would've equaled out the play though because prior I'd done the same thing with TRMA, just didn't buy as much (and yeah, I probably should've just held that one through the end of August).

Well, I sold half my shares of CEP shortly thereafter for a loss because I decided I had too much invested in this one Natural Gas stock, so I bought EXM with the remainder, since it's been beat up a bit lately (dilution, et al). I'm still thinking they're still less risky than DryShips, but then again, I'm a novice investor. They are a 0.40 book value though.

So basically right now my holdings are quite simplistic, about 1/3 Natural Gas, 1/3 Video Games (woot!), and 1/3 Shipping. Being comprised of CEP, ATVI, and EXM.

Should I be more diverse? Probably, but my portfolio is pretty meager in size, so I'm not too concerned about it at the moment. I just like the fun of trading, if I do decide to put any more of my money in the market, I'd probably just increase my ATVI holdings since I think in the next year or so, they'll be doing fairly well. 

So does anyone have opinions on CEP & EXM? I feel fairly knowledgeable about ATVI, so I'd just like to know more about the other two companies. I feel Natural Gas is at a trough at the moment, and may still be for a while, but it's a good time to invest. Same probably goes for the shipping companies (DryShips, Diana, Excel, etc). The big question I suppose about both EXM and CEP is how they manage their debt if the market doesn't improve soon enough. 

Also, does anyone have an accurate book value on CEP or an opinion on it? I think it was around 0.25, but I'm not sure. 

3 Comments – Post Your Own

#1) On August 31, 2009 at 10:30 PM, streetflame (99.81) wrote:

Yes natural gas is severely depressed and it is punishing the companies in the industry.  Just glancing at it CEP looks decent to me.  Do they have financial hedges against the price of natural gas, so that they are protected somewhat from the spot price?  I've never owned a natural gas producer, but that is a critical piece of information to gather before buying most commodity companies.  You will need to read their latest 10Q.

The problem with EXM is debt, and interest coverage.  Their debt to equity is 1.05 (generally .5 or less is considered safe, higher debt companies can be great values but that is an easy rule of thumb for beginning investors.) And the interest coverage is only .8, generally I look for at least 2 or 3 before I would consider that safe.  I would recommend a lower debt shipper like DSX, ESEA or TBSI.

Good luck.

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#2) On September 01, 2009 at 1:14 AM, chk999 (99.99) wrote:

CEP is interesting. I just looked at their 10-Q and have a few comments.

They suspended the distribution. This is not good, but is better than borrowing money to make it.

If you back out the mark-to-market losses, it seems they were gently cash flow positive for the quarter. The price of gas has fallen since the end of the quarter and I don't have time to dig into their hedging to see how much it changes the picture.

They seem to have valuable properties that can be developed out of the cash flow they have. The debt looks to be about 1/3 of total assets. 

If the price of gas turns up this might be a winner, but it could be a while before that happens. I would not buy it right now, but it is probably worth watching and digging into the debt structure (what payments are due when) and the amount of gas reserves per share. Buying gas reserves on the cheap seems like a good idea now.

Chris - long CHK, SSL, COP, VLO and other fine companies

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#3) On September 01, 2009 at 1:48 AM, awallejr (79.40) wrote:

As an aside.  Stay away from shippers.  If you are looking for yield there are alot of pipeline MLPS out there (EEP, EPD, KMP, etc).  If you are looking for energy, I would go oil (integrateds like BP).  If you really want nat gas, go the mlps there too (EVEP, LINE for example).

Just my 2 cents.

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