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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Bob Rudd who wrote (16163)	1/14/2003 12:30:41 PM
From: Wallace Rivers	Read Replies (1) \| Respond to of 78595

I hope the thread doesn't mind a mention of a stock which is not a "value" stock, as most on the thread would consider that term. I post pretty much only on this thread, that's why I mention it. I purchased some SGH this morning. It is subordinate to SGU, Star Gas LP. SGU is thinly traded, SGH is very thinly traded. Being an LP, it has a tax structure different from common stocks, which should be considered when making an investment decision. The company sells heating oil and propane primarily in the northeast/mid-Atlantic US. Heating degree days are running 1%-2% above normal (a rough guess, on average) in the northeast for the heating season through 1/4/03. Way above the comparison to the very warm early winter of last season. The northeast/mid-Atlantic is, and will continue to be, very cold at least through the end of the week - heating degree days will be significantly above the norm for this time period. Sales should be up significantly. When the dividend was dropped on SGH (not on SGU), the gap in share price between SGU and SGH spread to almost 8 dollars (SGU being higher). The gap is now about 5 1/2 dollars. Before the dividend cut, SGH traded near parity with SGU a substantial amount of the time, very occasionally at a premium to the share price of SGU. Given the current environment, I think that the dividend may be increased on SGH, and this gap will narrow considerably, yielding some nice price appreciation, in addition to a substantial dividend. One negative is that the company took out a "degree day" policy which would pay out up to $20 million dollars were this winter to be abnormally warm. So far, whatever the premium they paid is for naught. So, that item would hurt cash flow somewhat. As with Paul, I've been wrong many, many times before.