Use access key #2 to skip to page content.

Water, Water, everywhere, but not a lot to drink....Install 1 of Good water makes happy bulls!

Recs

0

January 02, 2009 – Comments (0) | RELATED TICKERS: VEOEY

     With the concern that water is becoming a scarce commodity, and always open for a few socially redeemable (though not required) investments for my church stock club, I did a little research the last week. As you may note in some of my pitches and the below,  I really, really am bullish on water.  I don’t mind paying for it, especially if it’s in the form of a good beer.  As you can see from some of my blogs/pitches, perhaps I like beer a little too much!  

    I was surprised to see that most of the bigger “water” plays also had waste disposal as a component.  I had thought desalination might be a good play, but found established players, (besides large caps like GE) a little scarce. I’m looking for other suggestions as water will continue to be scarce as long as climates shift, (for whatever reasons), and people insist on over building in Vegas to be closer to the slots and Elvis.   

    I recently looked into several stocks and I’m even more confused on whether there are any socially and financially good plays in this area.   I thought I’d share an expanded pitch or two as I get to them....here’s the first….

   VE:   Veolia Environnement  (sic):    I love the environment, we should treat it better, it would make better water......I like water, it makes good beer. Good beer makes happy bulls, and bulls are scarce right around here. I don't however, understand this company, so I should stay away from it and leave it to those who do.  

     While I understand water (beer) and the environment, I don't understand a company that has a $13B market cap and $18B in receivables.  Guess other people don’t like paying for water!   I understand goodwill, it's nice to have, but a Goodwill increase of 50% per year the last three years, to  a goodwill total very near the entire companies market cap, unless you drink a lot of beer first, seems like too much goodwill.   

   Par the goodwill, the receivables, and it still looks like some books are cooking (or water boiling over!)  $1.36B of income is a lot of income, very respectable.  It, almost, if you had no other uses for your income,  covers the $1.2B of dividends they are tracking to just about perfectly.  It’s nice to get dividends, not so nice to borrow to get them; maybe sustainable for a year or two. Might be nice to pay off some of the massive debt of overpaying for acquisitions (their take, sort of).    How this company rose  to $94 per share this year is also something I don't understand, but how they bounced back from $20 to $29 in three short weeks is a bigger mystery to me.

   Maybe I'm not good at reading international balance sheets, but one thing I do know, 319,000 employees, mostly in Europe where taxes and wages are the highest (if you count the benefits) is a lot of overhead.  “Right sizing in Europe,  (and it just might be needed here), requires a court filing and permission from the  government, with hefty severance pay.   

    One last thing that confuses me is their last quarterly report   ….. quote:  “shares were down sharply after the company announced Sunday a cut in its expected 2008 operating cash flow due to a slowdown in waste management activities and lower sales in its water business during the summer” .  Can anyone explain this?  Where I live, waste management activities is a pretty stable business and we try to get rid of it even faster in the summer, flies aren't in favor here. We also tend to use more water in the summer…..strange……  Second a few other comments:  Should not raise “much debt in 2009” and how much would that be…… “more selective in acquisitions”  wouldn’t that be a good idea?  (see I told you they admitted to overpaying).    

   Yep, I love water, good clean water, and getting rid of the waste is very important also.  Yep, I don't undertand a lot of things about Veolia, but I wonder if they know the difference between sh** and Shinola.   So, as far as VE goes, I don't think it's a good investment....care to bet a beer on this one??? :) 

   (Footnote:  Shinola was used to shine shoes in WW II. The term was generally used to suggest that someone, (usually seniority) needed to have their head checked or visit where the real fighting was, rather than worry about boots getting shined.  After a long battle, sh** might shine the shoes just as well.)

    Disclosure:  This fool does NOT own any shares of VE or shoe shine of any nature (that I know of, but at least not Shinola).  I am, however, looking for a few beer companies as I should own stock in them.  (Buy what you know, support what you buy).

 

0 Comments – Post Your Own

Featured Broker Partners


Advertisement