What I have learned from ENB mgmt over the years First and foremost, they are smarter than me.
They are also smarter than Wall St and all of their competitors.
I loaded up on ENB after the market clobbered ENB's share price following their acquistion of Spectra. I sold when ENB got back itno the mid 50's and announced that they anticipated much lower growth in DCF and dividends as a consequence. I used the proceeds to buy SU at $20 when the price of oil was in the crapper. I should have bought CNQ instead but I didn't know a bloody thing about the oil business. I just wanted "in" and SU seemed like a safe bet at the time to the untrained eye.
I sold SU in the mid $40s and jumped back into ENB with a piece of the proceeds when Moda Midstream sold the Ingleside Port to ENB for what looked like pennies on the dollar and threw in two pipes to the Permian for free. The deal was a timing issue as Moda was hemorhagging cash. Nobody was interested in the deal other than ENB who used their enormous cash flow to absorb the project.
I jumped into ENB with both feet (and later an arm) when I figured out the implicatons of the Dominion natgas acquisition. The market had once again pummelled the ENB share price. At the time, I posted that ENB had picked up a huge amount of pipe in the deal for US$14 billion which only paid for the cash flow. If I remember correctly, the replacement cost of the pipe was about US$800 Billion. AS I mentioned in my last post, ENB is unlikely to be able to increase revenue on the deal more than the cost of living or whatever index the regulators use, but I'm betting on the fact that they can squeeze more profit out of the $800 billion of assets. How will they do that? I dunno but I bet they do as Ebel repeated many times that it was a generational win.
All of the information for the Spectra deal, the Ingleside deal, and the Dominion natgas deal was available to the street and to all of ENB's competitors. The decision making by ENB mgmt was simply superior to its competitors and the street can't see past its "next earnings date.
So, what is the takeaway from all of the above?
There are a few imo:
* ENB mgmt are smart and have a clear vision of what they are good at
* ENB are strong operationally which allows the to assimilate acquistions and cost cut effectively
* ENB has access to capital that allows them to buy distressed assets
* ENB is not afraid to strike when competitors and even the market are fearful.
For me, the bottom line is that when ENB is buying and the street is punishing the share price, it might be a good time to buy.
I don't know if ENB is going to be able to gobble up any more large acquisitions.
If I had to guess, now that ENB has positioned itself as the giant in the industry in America, the next phase for ENB will be the long grind towards cost efficiency.
Lowering costs over time is not a new idea. Suncor is a perfect example as they spent tens of billions to set up their tar sands operations which initially resulted in a very high cost per barrel. Over time, their engineers chip away at costs by finding better processes to the point where their costs are now competitive with everywhere other than the Middle East (who have their own problems as oil is their sole source of income). You see the same principles at play with electronics and elsewhere.
I'm kinda surprised that Birkshire Hathaway hasn't taken a position in ENB over time as ENB fits the BH investment philosophy to a "T". Slow, steady, methodical, huge moat, strong management with a good track record. The only reason that I can think of for BH not getting involved is that ENB has never allowed itself to get in a financial squeeze which is when BH pounces.
All of the above info is available to everyone. My thoughts on the topics are just my best guess. As I have mentioned before, I think ENS is heading back towards $15 per share or higher based upon how ENB performs. After writing this, it is reasonable to expect the share price to go down as that seems to be how the market works.