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

To: gcrispin who wrote (57942)	9/7/2016 5:22:17 PM
From: Paul Senior	Read Replies (1) \| Respond to of 78673

SE: Large, moaty, has long-term contracts, increasing dividends every year and future expected also. Several firms raised targets for Enbridge as result of the buyout offer: 247wallst.com SE revenue hasn't risen much in past nine years. Ok, there's a moat, but if SE isn't raising revenue because locked-in long-term contracts, that sort of means (to me) that stockholders maybe can't lose, but they won't necessarily win either just because there's a moat, especially with the stock at such a relatively high level (compared to past years). Apparently "Spectra is focused mostly on natural gas pipelines and Enbridge...mostly...on oil-related assets". If there's a synergy, I don't see it. -- I don't see what Enbridge is going to do so much better with SE assets than what SE management is already doing or not-doing pre-merger. Otoh, I'm old and don't see so well anyway, so if you're confident of SE/ENB prospects and/or pro formas then I defer to you. But for me, I'll stay out for now.

To: gcrispin who wrote (57942)	9/7/2016 6:22:32 PM
From: Graham Osborn	Read Replies (1) \| Respond to of 78673

I agree the NG >> crude pipelines have some moaty aspects, although overcapacity risk is not remote. But it's not that simple. One can ask the question "why are there so few Buffettlike businesses around?" And, for once, Mary Buffett has an insightful answer - the Buffettlike businesses with minimal operating leverage were levered up with financial leverage by enterprising CEOs or PE firms. You might call that the "equivalence principle" of finance - that a business with low operating leverage can be made to mimic the risk profile of a business with high operating leverage by the appropriate application of financial leverage. SE has less debt and "project completion uncertainty" than some in the group and so is probably less risky, but I would still place it in at least the moderate risk category. I haven't looked at SE's distribution bylaws in detail but these are rarely simple. I will say that I am short LNG because it represents the "worst of all [above] worlds" and leave it at that.