rhess, thanks, appreciate your comment on EIX. As you asked, here's how I came to EIX:
I found EIX when I saw published articles in July saying there was a power shortage in California. More than actually seeing such articles though, was a confluence of events:
1. I came to believe there was a problem. (There've been articles for years saying there's a looming shortage of electricity and I never paid any mind to them.)
2. Energy providers were getting ever more expensive - I missed a 20 bagger on CPN (discussed on the value thread in maybe '96 or '97, --It is specialized in a specific area of energy generation, but I hadn't any idea there REALLY could be a growth stock in energy business), plus I also missed SGR.
3. SGR provided an important clue that something positive was about to occur for utility investors. SGR is imo, THE dominant designer of piping systems for utilities. The stock dropped sharply on poor earnings (lack of orders too, I believe) at the end of '98. And I recall discussing it then on the value thread after the stock dropped to around 12 or 10 or below. We all passed on it at the time and subsequently. (I am guessing, since the stock's not been mentioned by anyone after that brief discussion.)
There is just something about coming back to notice the stock you've dismissed as unworthy and seeing it up double or triple. It just - to me - smacks you about the head and gets your attention. About July (2000), I am noticing CPN up a TON plus SGR is now (18-20 months after the value thread discussion) a 5 bagger for somebody (not me) at about $50/sh (And today it's about 74 down from its high over 90.)
Looking a little closer then at what was happening to stocks electricity related, many were up. I saw though that EIX, at $19/sh was not. I believe that EIX is likely never become anywhere near the good investment that CPN or Enron or some of these other energy providers became, but...
I realized that if EIX, the dominant - monopolistic? - energy provider in Southern California (13M people), was to lose some of its dominance, it was at least trying to diversify or deal with the deregulation of energy that was occurring everywhere. Coupled with a 5% dividend yield for some downside protection, a strong likelihood that S. California would grow and its energy needs continually increase, I took a position.
My error - or at least what's causing me to exit - is that I just assumed (incorrectly) that EIX, which apparently had to go outside its normal channels to procure electricity to prevent rolling brownouts, would be able to pass those costs on to people who consume the electricity. Within the past month or so, I now see that that may be up to the political or judicial process. It's just too complicated for me.
I've exited Warren Buffett stocks before - and before Mr. Buffett said that he was out -- and in every case, I've been wrong to do that. Again, my belief is that Mr. Buffett has never lost money when he's taken large stock positions. For EIX, that was reported as $18.9M, or $20.52/sh. (EIX closed Fri. at 22 13/16.) I've just lost confidence in what I'm about regarding EIX, and I believe the stock will dance around as the legal and political process plays out. Also, I would like to read of some support from Buffett followers here. If I'm the only guy on the thread who's owned or owning EIX, that is a sign that maybe it's very true that the EIX situation is complicated enough to leave to professional analysts or tough and lonely enough that strong nerves indeed will be required to stick with Mr. Buffett on this one. |
