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I work as a consultant in the heavy machinery industry. My articles cover heavy machinery, mining and transportation industries. All my articles are written by me and they only reflect my views and opinions. I try to only invest in companies with a market cap of at least $50 billion with healthy... More
  • Lessons From Tokyo Electric (That May Be Done For) 0 comments
    Jan 25, 2012 1:35 PM | about stocks: TKECF, BP

    Tokyo Electric (OTCPK:TKECF) used to be one of the most popular stocks in Japan. In the country, most fund managers and banks used to own this company, just like Apple (NASDAQ:AAPL) and Google (NASDAQ:GOOG) in US. But it seems like the company's good days are over. In the last 52 weeks, the stock is down by 88% and now there are serious talks about nationalizing the company, even though it may be a temporary move lasting 5 to 10 years. 

    The company was operating multiple nuclear power plants in Japan and one of those power plants (Fukushima Daiichi plant) became incapacitated. Also, there were many victims in the near area as the power plant leaked some radiation. The company had to find about 13 billion dollars in order to compensate the victims and run some of its operations but it had a lot of trouble finding the money. Japanese government said that it would pay this money if the company would accept to be nationalized for a period of 5-10 years and banks said they required government's guarantee in order to give the company much needed loans. Either solutions would lead to nationalizing of the company, and it seems like this is the end of the road for the company's investors who already lost most of their money.

    The final decision on Tokyo Electric will be announced in March by a committee formed by the government, but I don't see any option other than the company being nationalized at this point because even banks that Tokyo Electric seeks credit from want government guarantees and government will only issue those guarantees to a company it -at least partly- owns. Investors that are still long in this stock may want to get out while they can. people and the environment. Investors should watch closely the steps their 

    On a side note, this incident could be a lesson to many American and international companies that do not follow safety procedures as strictly as they should. In the energy industry, some accidents can be extremely costly for the company, the company is taking to ensure safety in their plants or fields if they are invested in energy stocks. This is why I was skeptic about BP (NYSE:BP) in my article "BP is too risky for me." Again, I am not saying companies like that will go down, I am not saying to short them, I am just saying to be extra cautious. 

    I would suggest investors wanting to get into energy industry to pick companies that have a track record of no accidents, safety issues, fines associated with such issues in the last 20 years or so. Sometimes one accident is all it takes to bring a company down. Of course some may say "accidents are not always fault of the company" but many times the company's stocks will get punished heavily even if it's not the company's fault. Always keep in mind that stock market is highly emotion driven. 

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Stocks: TKECF, BP
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