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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: Tommaso who wrote (51701)	7/21/2004 7:30:00 PM
From: Taikun	Read Replies (1) \| Respond to of 74559

OT/CanRoys Tommaso, I did own ES at one time, but after studying the effects of the last round of interest rate rises on the CanRoys (they sold off, some more than others) I couldn't justify the added risk. If Dodge (Bank of Canada) raises rates at some point over the next few months, there has been comments that the more leveraged trusts will be hurt the most. I have tried to avoid highly leveraged trusts but have built up a basket of trusts according to two opposing valuation approaches. The first, espoused by Peters & Co. (the Calgary investment bank, who I think is one of the best) focuses on trusts who do the best job of increasing production of given reserves, without adding debt. Their top three picks are Arc, Viking, Paramount, which I own. The second, used by some other portfolio managers, focuses on how well the trust can grow reserves efficiently (at a reasonable cost and without much debt) and bring them onstream. Using this approach one gets trusts like Baytex, Bonavista, Crescent Point (NG), and Vermilion (European diversification). So, as you can see, Energy Split, with its prodigious use of debt (leverage) across all of the trusts in the holdings, amplifies the debt at the trust level. In addition, there is another level of management fees taken out. If it were the hedge fund industry, this would be like a fund-of-fund. I also own a few others, Acclaim for its high ROC and FDG/WTE_U.TO for the coal play, but thats it. Finally, there is the termination of Energy Split which brings up the issue of when people might start exiting if the price is above NAV. Then again, perhaps I'm missing something.