When is the RIGHT time to buy ENSGolferman posted this week that he was considering buying ENS but the premium had jumped up to 20% which he thought was too high so he decided to back off. I have been tossing the idea of "what premium is too high" around in my mind since I read his post. I have come to the conclusion that while the premium to the NAV can be a headwind, the best time to buy ENS has nothing to do with the premium.
In the past, when the premium moved above 20%, Middlefield would hit us with a Raise which is a disaster for the share price. The last Raise was done on Sept 7th at $12.65 the day after the share price closed at $13.34. The Raise price represented a 5% discount to the market. Typically, the share price drifts downwards by up to another 3% discount to the Raise price before consolidating. I started buying recently at $12.35 following the recent Raise which was about $0.08 above $12.27 figure representing a 3% discount from the Raise price.
OOPS! The ENS share price followed the dip in the ENB share price which sucked. However, I kept buying ENS all the way down with my last fill at $10.27. That brought my average cost down to $11.75 which represents a 7% discount to the most recent Raise.
Dollar cost averaging (DCA) can work out really well, or it can drag you into the abyss. If you attempt to lower your cost on a stock where the "promotion" is over, you end up being a bag holder.
Why did I choose to DCA ENS on the dip? Good question as I was asking myself the same question as I watched the price drop for 7 straght trading days. Ugh.
Here is a glimpse of my thinking which I call it a strategy when it works :)
A quick check of a comparison chart on ca.finance.yahoo.com shows that on a percentage return basis, ENB pretty much always outperforms ENS by a small margin with an exception being May through July this year. I have posted the link to the comparison chart below.
I'm not a chart guy, but comparisons can be useful in some situations. If you take a moment to copy and past the link below into your search bar, you will note that the chart generates pretty reliable "buying point" moments. Those moments occur when the percentage return of ENS drops off a cliff relative to the percentage return of ENB. Every time a ENS cliff drop happens relative to ENB, ENS rallies pretty hard shortly afterwards as the leverage kicks in.
Would I rely upon the cliff drop strategy for other stocks? No. I see ENS providing a unique opportunity as it is a pure leverage play on ENB with an outsized yield as a kicker. IMO the most important factor when it comes to ENS is that ENB itself is one of if not the most conservative granny stocks on the board. When the market punishes ENB, it is more about the impatience of fund managers who want/need ongoing stock wins to justify the fees that they charge as opposed to ENB management making dumb mistakes. The BoD and management team at ENB have proven over and over again their ability to identify opportunities and to strike. Then they fold in their acquistions smoothly and on time while minimizing downsizing costs. IMO, that is a unique skill set that provides superior returns above and beyond their conservative guidance. Sometimes it takes awhile for the market to recognize that ENB has done it again, but eventually shareholders get rewarded. In the meantime, ENS keeps cranking out those $0.13 dividends every month without ever missing a payment.
I find Stockhouse really cumbersome when it comes to links, so you will have to copy and past.
https://ca.finance.yahoo.com/chart/ENS.TO#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-