John D. Thomason's  Instablog

John D. Thomason
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I am a retired (as of September 2001) IT manager. While I have always followed the markets, during my IT career my market research time was limited. Upon retiring, I have focused full-time on the markets and my own market education and growth. I have evolved my investment/trading strategy over... More
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  • Enerplus Reaches 52-Week Low Today 0 comments
    Apr 5, 2012 5:30 PM | about stocks: ERF

    The following is an excerpt from my Daily Blog for April 5, 2012, Final Posting, after the market close:

    I added to my position in Enerplus (NYSE:ERF) today. ERF is not on my lists, but I plan to add it to my Tier3 list, which consists of high-yield, speculative stocks, soon. This former Canadian trust reached a high of $59.45 in 2006, before the Canadian trust "Halloween Massacre", dropped precipitously afterward with the rest of the trusts, recovered to go above $50 briefly in 2007 and again in 2008, dropped to a low of $12.85 during the financial crises, recovered to a high above $33 in early 2011, and has steadily declined since, hitting a new 52 week low today. All the while, ERF has been steadily pumping out monthly dividends. I bought more today at $20.55. Earnings have been slammed hard by the low price of natural gas, which accounts for a significant portion of ERF's production. Sporting a yield above 10% and a payout ratio of over 300%, the market appears to have already priced in a dividend cut, which indeed is a definite possibility. Ignoring the over 34 P/E ratio, inflated by depressed earnings, the remaining valuation metrics allow ERF to be classified as a value stock, with a book value of $18.16, and a P/B of 1.16. The book value in this case is real, consisting of producing oil and gas properties, and I am further comforted by the very manageable debt level, with a leverage ratio of only 1.7. This is a bet for the long run. Eventually, but hard to say when, the price of natural gas will rise again, and I am confident that ERF will remain afloat until it can shine again.

    My Daily Blog, which is issued twice daily, before the open and after the close, can be viewed at:

    Disclosure: I am long ERF.

    Stocks: ERF
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