XMFSamstevens (37.90)

XMFSamstevens's CAPS Blog

Reexamination Day 11: Laclede Group (LG)

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June 02, 2011 – Comments (2) | RELATED TICKERS: LG

Haha oh man LG... First note that this isn't the LG that makes phones, although I think I made that mistake when picking it originally. Just goes to show how little I knew back then! So what is Laclede Group? Well, its a small natural gas company in Missouri that somehow has been around well over 150 years. They claim to actually be the 8th oldest stock on the NYSE.

Quantitative: P/E around 15, P/FCF around 10, consistent and slowly growing dividend at almost 5%. Some debt but not that much. A relatively small company although they make a big deal out of being the largest natural gas provider in Missouri, Market Cap<$1B. They're about industry average in terms of profitability. Income is actually on a negative trend the past couple years. Honestly I think their totally average quantitatively, nothing remarkable here. Most remarkable thing is probably their beta of .08, which is just so unbelieveably boring.

Qualitative: I literally knew nothing about this company before I did a little bit of research to write this article. So at this point I've figured out that LG is a holding company for Laclede Gas, which distributes natural gas to over 600,000 customers in eastern Missouri. Really quite small. I kind of like how they have maintained effective ownership by not becoming too large, but at the same time, I have no idea why one would invest in them. I don't see how they have any competetive advantage right now; I don't see why Missouri would be an area of economic growth, and I really don't see this stock doing much other than moving with the market. A pretty boring stock really.

Verdict: If I hadn't picked this before by accident, I see no reason at all why I would invest in them today. I think they're going to remain around the same price for a very long time, and while they do pay a dividend, which is nice, this one's too boring for me, and I don't see any reason this one would beat the market, so I'm dropping it.

2 Comments – Post Your Own

#1) On June 02, 2011 at 2:59 PM, TDRH (99.92) wrote:

Stability and income. Regulated monopoly. What is not to like with a 5% yield and 60 month CD's paying a whopping 1.67%. I do not own them, but you could do worse.

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#2) On June 03, 2011 at 11:11 AM, XMFSamstevens (37.90) wrote:

This is true, there is definitely stability in this stock, and there is income with the dividend. I agree you could do much worse, but at the same time it's not really the kind of stock I'm looking for in CAPS. I would be ok keeping it, because I think it's just going to follow the market, maybe beat it by a little, maybe lag a little, maybe even more likely to slightly beat the market but in CAPS that isn't very helpful.

What I'm trying to do here is eliminate picks from my CAPS that I don't have a very good reason for picking, and just consolidate to companies I think have a good chance of beating the market by a good amount long-term.

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