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Strategies & Market Trends : Value Investing

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To: Paul Senior who wrote (45084)	12/23/2011 12:21:19 AM
From: E_K_S	1 Recommendation Read Replies (1) of 78673

SuperValu Inc. Common Stock (NYSE: SVU)- sold a few more higher priced shares RAM Energy Resources, Inc. (NasdaqGM: RAM) - Peeled off 10% of shares on today's news finance.yahoo.com Did some more house cleaning today selling a few more of my higher priced SVU shares at $8.05/share. My last Buy was 8/24/11 where I doubled up my position at $6.84/share. Still underwater on 15% of my shares but I believe the company has long term value. As long as they continue to generate FCF, pay down their debt and operate their very profitable logistics subsidiary, they should book adequate earnings and maintain their generous dividend. SYSCO has been eyeing a company to buy that will help them grow their business, and SVU's logistics (distribution & warehouse operations) division has been mentioned as a possible acquisition candidate. That is worth at least $3.50/share IMO. Will add to my core SVU position in 31 days if I can buy in the low $7.00/share range and no new negative news occurs. The news for RAM was quite positive with the stock up 83% on the day. Took a little off the table and want to scale down this position as it is now represent 8% of my E&P basket. I would like it to be a 5% position. The deal increases the share count from 80M to almost 280M but $270M of new capital is added to the common share equity base with another $275M in convertible notes. The total equity dilution is only around $0.25/share and the new capital should allow them to develop their oil fields in Oklahoma and Texas. If/when the convertible notes are converted another 110M shares will be added to the pot that will further dilute the shares base perhaps by another 25%. There was no mention as to how they would calculate the conversion amount but RAM really did not have many options for raising the necessary capital to develop these wells. The real kicker to the deal is the former CEO of Petrohawk Energy, Floyd Wilson, will become their new chief executive. He brings a lot of experience to the company, has a big bet that they will succeed ($550M) and the RAM shareholders have a seat on the bus. I plan to hold onto at least 50% of my shares to see how this ride turns out. EKS

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