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Strategies & Market Trends : Value Investing

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To: Paul Senior who wrote (46752)	2/25/2012 7:08:13 PM
From: E_K_S	1 Recommendation Read Replies (8) of 78507

Hi Paul - AGL Resources, Inc. Common Stoc (GAS) - Hold MDU Resources Group, Inc. Commo (MDU) - Hold Atmos Energy Corporation Common (ATO) - Buy Link to detailed Yahoo Finance listings for the companies listed above : goo.gl I too am very Bullish on the transition to LNG but it will take time and will probably be a losing proposition w/o government subsides and/or until infrastructure is built that reach break even economies of scale. The middle of the road proposition is to invest in those companies that already have large NG and LNG operations including pipeline distribution networks and storage assets. All three companies listed above are ones I own but GAS & MDU are selling at their high end of their valuation. I continue to wait on GAS. As of 2/24/2012 their PE was 19.02. This is the latest figure I could find that reflects the merged operations of AGL and Nicor ( ir.aglr.com ). It's still too high for me to add shares. I have not seen any analysts estimates for the combined company so I have no idea where their Forward PE is headed (lower than 19?). The same is true for MDU, so I am a seller of shares around $23.00/share and a buyer below $19.00/share. The analysts have a Forward PE of $16 so their expected earnings forecast are increasing which is good so I may raise my Buy target below $20.00. My overall target PE is 15 as long as the company can maintain a 4% dividend. You might want to look at Atmos Energy Corporation Common (ATO). This is one I will probably move up on my add list. Their PE is 14 w/ a Forward PE of 12. Their dividend yield is 4.3%. Company just went ex-dividend on 2/23/2012, so it is selling near it's lows. The company has a collection of excellent NG assets that include 3M customers (including commercial, public authority & industrial) all who are good candidates to use LNG in their fleet vehicles. They own very profitable pipeline gathering & distribution systems. Their NG storage assets include five underground storage reservoirs in Texas so their storage resources are near the source. Of the three companies ATO has the smallest underground storage capability (but still quite large) but for the price IMO is the best value proposition now. The one negative, it ATO carries a bit more overall debt than GAS and MDU but owning operations in the regulated side can pretty much set their price to service that debt as long as they follow the regulatory procedures. That's the way I see it and I am still quite bullish on the industry. FWIW, I also have been buying the actual NG commodity in XCO. My buy target is below $7.00/share. The historical ratio of $Oil/$NG is out of kilter even with the glut of NG in the market. It very well could go lower (and I will buy more) but to me the value proposition gets better especially when articles appear that mention new LNG fueling stations. I love to buy straw hats in the Winter time (for 50 cents on the dollar) when I can sell them during Summer time (for 80 cents on the dollar). I believe this will be the case for NG at some point in the next 3-5 years. EKS

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