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I suspect that most dividend investors are conservative by nature. I am. I don't believe I have any special talent or gift for trading, a crystal ball, or any access to insider information. Consequently, I have little expectation of prospering by consistently buying low and selling high. In... More
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  • Why I Like GreenHunter Resources (GRH) 0 comments
    Dec 26, 2013 10:56 AM | about stocks: GRH, MHR

    I am a conservative investor who regularly invests primarily in preferred, fixed income, cumulative securities of companies I believe have little chance of going bankrupt. I invest this way because I know that there are only two ways that I can suffer a loss. The first and worst is that the company goes bankrupt, which still might not be so bad because as a preferred shareholder, although I sit behind bondholders, I stand before common shareholders in the event of liquidation. The only other way I can lose is in the event I sell or I'm forced to sell at a time the share price is below where I bought it. As far as I'm concerned, this second possibility is an impossibility. I state this because the only way I intend to part with my preferred positions is when they are called by the company, who will pay the full offering price plus any dividend interest owed. Furthermore, even when a company, facing difficulty, suspends its preferred dividend payments, I know that because I only invest in cumulative preferred securities, said company will have to make up all those missed payment before they are allowed to make any future payments to their common shareholders. Last year, BEE and FCH repaid multiple quarters of missed preferred payments in the manner I have just discussed, which greatly enhanced my portfolio's net liquidation value. Consequently, when I research a company whose preferred shares I anticipate investing in, I simply attempt to determine whether or not said company has a chance of going bankrupt and, if so, how great that chance might be. For my purposes, in almost all instances, before I invest, I believe that chance of bankruptcy be infinitesimally small. Since I began investing in 2008 and predominantly preferred investing in 2009, I invested in only one company that actually went bankrupt, and that company share price was so low at the time I purchased it, I figured the tremendous upside and negligible downside was worth the risk, which, as it turned out, wasn't. Sorry for the long digression, however, I feel it warranted while discussing why I like GRH. Actually, I hate its balance sheet, but I love its business model. Although it was incorporated in 2005 as an alternative energy company, it changed direction in 2011 to become strictly a water resource management company serving the burgeoning oil and gas exploration hydraulic fracturing industry, and GRH is primarily located in the energy-rich Marcellus and Utica shale plays. Better yet, Gary Evans, the CEO of MHR, founded GRH and is currently its major shareholder. Therefore, it takes no great genius to assume that MHR is the primary customer of GRH. In reality, GRH is barely a three year old, capital intensive, rapidly growing company, striving to keep up with the escalating triple digit demand for its water resource services. Other potential customers for GRH's services are: ECT, AR, CVX, CHK, to name a few.

    In conclusion, I am in the happy position to risk a modest portion of the gains I have realized since I re-entered the market in 2008, believing the hoped-for reward, I anticipate will far outweigh the risk I have taken.

    In future articles, I will go into further detail about the operational activities and financial health of this company.

    Disclosure: I am long MHR, GRH.

    Stocks: GRH, MHR
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