NYSEAM:SIF - Post by User
Comment by
ThePlumon Jan 16, 2009 10:12am
447 Views
Post# 15708896
RE: Market is almost never wrong?
RE: Market is almost never wrong?All kinds of suckers buying gas contracts not knowing the prices they pay over the spot.
I don't think that is the strategy of the company - and if it were, it is not a viable business.
The market usualy doesn't miss by much. Sure it does - it can missprice the true value of a business for long period of time. Personally I am holding this stock for a couple years after it converts from an income trust (at least) - as this is one reason that the share price is depressed, and I don't see that changing until they are incorporated, and the business model continues to be proven.
Anyway, love the dividend just hope we don't get side swiped here. Ditribution cut - why? I see the distributions as secure.
Maybe the market is saying that the new contracts being renewed now at current spreads could lead to much narrower margins when gas recovers in price? This is completely contrary to the business model. When a client signs into a new contract - the company pulls their past gas/electricty usage from the utility and estimates their future usage. They then purchase the estimated usage of the client over the next 5 years, and then secure the margin (I believe the margin goal is 20%).
The estimates are certainly not perfect - and more gas might have to be purchased for the client in the future, or vice versa. I am not sure of the strategies that SIF makes use of, but with the depressed natrual gas prices, I would certainly think they would purchase extra, as certinaly the price of gas will recover.