On the one hand, it is sad that AVLIS (which promised big electric power cost savings) turned out to be too expensive to pursue.
On the other hand, this action has given me a great deal more trust and confidence in w.r.t. the shareholder-friendliness of USU management. The one loose end about USU that has made me nervous, up until today, was that I really didn't know how carefully they would shepherd shareholder value.
This action indicates to me that we might very well have a competent management, that might not fritter away value in search of sexy new, more efficient technologies. They might actually be considering the cost of capital, and risks to the business of proceeding aggressively (leveraging up and committing to a big capital project).
I've always considered the R&D expenditures as working out in one of two ways. First, if the AVLIS project went nowhere and development was suspended within a reasonable timeframe, then they are a sort of non-recurring charge that should not be consider as part of core operating earnings. Second, if AVLIS proved feasible, then the R & D expenditure was really just advance investment in a worthwhile asset, and should therefore perhaps be accounted for as a capital investment.
My fear was that AVLIS would go nowhere, but management would not realize this for a long time. If a project is going to waste money, it is best that it wastes as little as possible for as short a period of time as possible. Not knowing much about management, I was concerned that in the event that AVLIS turned out to not be feasible, they wouldn't terminate it early enough.
Now I must decide tonight whether to increase my position in USU tomorrow. I am thinking about doubling it. (FWIW, I hold my USU in my tax-deferred RRSP account ("Canadian IRA"), due to the high dividend and possibility of a premature capital gain.. The position is presently 5.6% of my RRSP, and I am limited to a max of 20% "foreign content")
- Daniel |
