Hi Ray,
Personally I really like the dialogue that happens on SI - there's considerably more accountability for statements made, and the quality tends to be a lot higher. It's great to watch a bear and a bull have it out because you see the points and counterpoints and have to each consider the points the other is making.
The link is as follows:
thestreet.com
I actually like the risk/reward quotient on this stock. At something like 8 times FCF, I like Calpine's strategy of only building when they have a significant portion of their capacity locked in. In many ways, Calpine is like a financial services company in that they are largely only focused on the execution -- not the derivatives, commodity speculation, timing, or any of the other sexy products, but they make money by executing well. Well enough that they are a low cost producer, and as a result can continue to expand.
In this way, I do not believe that it is a terribly aggressive idea to suggest that they would continue to grow because they are often the low cost producer in the markets that they are in. The safety margin in this stock is that though they have a high degree of debt, Moody's recently upgraded their public traded debt to investment grade (the report that can be found on their site, is a very good analysis of the risks given their audience). Another issue is that they have locked in a large amount of their contracts through the next few years -- so their cash flows are considerably more predictable than many producers.
With a further note on risk, what their strategy also infers is that of the plants that are going up now, they must already have capacity locked in. Even without those new plants, IMHO if they were evaluated like a plain vanilla utility, they would be a little undervalued.
Another name that I'm following from a distance is AES which is maneuvering through a few problems. Have you followed that one?
Later,
Clement |
