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Strategies & Market Trends : Value Investing

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To: Grommit who wrote (38027)	6/10/2010 3:22:43 PM
From: E_K_S	Read Replies (3) of 78744

Hi Grommit - RE: CenterPoint Energy, Inc. (CNP) CenterPoint Energy to offer 22 million shares CenterPoint energy offers 22 million shares at $12.90 each, expects to raise up to $314.6M finance.yahoo.com The company is going to do a 22 million secondary offering. The company said Wednesday it would price each share at $12.90/share. 10x the average volume today and I suspect that much of the trading is due to the secondary announcement price and arbitrage speculation. I sold some August $12.5 covered calls on the position I bought 5/20/2009 at $10.00/share. I think there will be some arbitrage play as the underwriters have an option to buy more shares at the offering price (up to 30 days after the issue date). I am betting that when the flood of shares hit the market, the stock could trade below the secondary offering price of $12.90/share. My strategy will be to double up on my position and have 1/2 of my position called away in August. Hopefully, I can also collect the August dividend. I am not too sure of the dilution to earnings or if the dividend will be cut as a result of the 22 million share offering. It only represent a 10% increase in the outstanding shares. The PE continue to be excellent around 10, dividend payout ratio at 69% well in the good range and a 5.8% dividend yield. I like the CERC Corp business. CenterPoint Energy Resources Corp. (CERC Corp. and, together with its subsidiaries, CERC),is the unregulated component of their business. This division owns and operates natural gas distribution systems in six states. Subsidiaries of CERC Corp. own interstate natural gas pipelines and gas gathering systems and provide various ancillary services. A wholly owned subsidiary of CERC Corp. offers variable and fixed-price physical natural gas supplies primarily to commercial and industrial customers and electric and gas utilities. CNP should be a good long term hold with growth from their CenterPoint Energy Resources Corp. This is one I plan to accumulate over the long run. EKS

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