Huge dividend + valuable assets + hated sector = BUY
Penn West Energy Trust (PWE) is the largest CANROY aka Canadian Royal Trust. CANROYs are similar to the MLPs that are available here in the U.S. in that they pay huge dividends in exchange for tax benefits from the government. The difference is that the Canadian government pulled the rug out from underneath CANROYs during the "Halloween Massacre" and decided to start taxing them despite campaign promises that they wouldn't. That's why this is a much hated sector and many investors are staying away from it. The new taxes don't kick in until 2011 and even then most CANROYs have built up huge pools of reserves that will enable them to avoid paying taxes for at least another year past that. So by buying PWE today, one basically will be able to collect a dividend of at least 15% (paid monthly!) for the next four years. By the time that 2012 rolls around the company will have to decide if it wants to try to reorganize as an MLP here in the U.S., change into a normal corporation and focus on growth, or do something else. I'm not too worried about what form PWE assumes because oil will be over $150/barrel by then and the company's assets will be worth so darn much it won't matter what they do. For goodness sake, oil has risen from $60 to $108 over the past year and yet PWE's stock had dropped from around $30 to under $28. Here's the simple formula that I used to decide to purchase PWE
Huge oil and gas assets in a country that borders the U.S. + huge sustainable dividend for the next four years + hated sector that provides a discount versus other similar companies = BUY.