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Pastimes : The California Energy Crisis - Information & Forum
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To: deepenergyfella who started this subject1/12/2003 1:54:40 PM
From: Bearcatbob   of 1715
 
How Profit is Possible from the IPP Debacle:

To:aerosappy who wrote (16732)
From: jim_p Sunday, Jan 12, 2003 1:41 PM
Respond to of 16738

Why would anyone sell RRI unless there is another stock that is a better buy? I can't find any and I've looked pretty hard.
A few facts that we all should consider:

1. The IPP sector is cyclical and is going through it's first and most likely one of it's most extreme cycles to come.

2. RRI is one of the strongest in the sector with the lowest leverage and 60% of it's earnings for 2003 hedged.

3. Wall street always goes to extremes in both directions.

4. RRI's book value is currently $21.49 and it's growing by 5% a year in today depressed market.

5. In several years the sector will most likely be heading towards the opposite extreme on the high end will be selling at a premium to it's book value.

6. By the time we are near the highs on the next up cycle for the IPP's, RRI's book value will most likely be in the $25.00-30.00 range.

7. The use for energy is not going away.

I don't know of any stock that I would feel comfortable in the fact that I will most likely receive a 700% gain from the current price if I just hold on and do nothing. There will be shake outs on it's way back up, but we are all not smart enough to play them all correctly and not get caught without the stock on it's way to the next run.

Those who own RRI should be thankful to the market gods for one of the most extreme examples on how the markets works and just enjoy the ride back to a price that will exceed fair value in the next several years.

JMHO,

Jim
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