Value Investing Corridor Resources - Trades near net cash with positive cash flow and possible catalyst |
- Corridor Resources - Trades near net cash with positive cash flow and possible catalyst
- If Warren Buffett was starting out today would he still be able to amass such as fortune using his current strategies?
- DE Shaw: Inside Manhattan’s ‘Silicon Valley’ Hedge Fund
- No disconnect between growth and value
- Michael Mauboussin – The Four Sources of Alpha
- Activists nominate five directors to TransAlta board in bid to derail Brookfield investment
| Corridor Resources - Trades near net cash with positive cash flow and possible catalyst Posted: 26 Mar 2019 08:28 PM PDT Corridor Resources is one of the more interesting, straight forward net-nets with reasonable upside that I've seen in awhile. As at today's writing: Corridor's Market Cap: $63.1MM Management's forecast March 31, 2019 NWC: $63.4MM (99.9% of this will be cash) Decommissioning Liabilities at Sept 30, 2018: $8.7MM Net cash: $54.7MM Corridor is a natural gas producer in New Brunswick, Canada who shuts in ALL of its production when natural gas sells at lower prices during the warmer months. The thing that benefits Corridor is New Brunswick recently had its main gas supply turned around and Corridor is approaching monopoly status as a natural gas supplier (although I wouldn't expect it to last). This results in the company achieving astounding prices for its natural gas >$8 CAD/mmbtu meaning it ends up cash flow positive (or will for the next five years if nothing changes, see below). Now here's the fun part. New Brunswick has a moratorium on fracking, and Corridor has been in talks to lift the ban, at least for a few of its wells. This was driven by the New Brunswick provincial election where the new premier of New Brunswick happens to have been executive at the local oil refinery was elected in late 2018. You have some pretty strong tailwinds as well as the high natural gas prices result in Canada's highest gas bills which makes the population more interested in allowing fracking to bring down those bills. Additional reading about the situation is here: Other catalysts: Generally, the issue with Canadian reserve reports is they have...very optimistic pricing assumptions as compared to what the market is expecting. Canadian companies use the forecasts of their reservoir engineers which have been recently predicting oil prices to increase steadily to >$90 a barrel in the medium term. This is not true of what is in Corridor's reserve report. It assumes commodity prices which are much lower than what Corridor has been realizing. For example, the 2017 reserve report assumed $6.25/mscf for 2018 when they actually realized $10.58 through 9 months ended Sept 30, 2018. So, with that said, the downside looks limited (presumably your floor is the current net cash balance with some adjustment for liquidation if it came down to it), and realistic upside is >50% and possibly more. The reality is allowing fracking might end up actually hurting Corridor if prices were eventually pushed down to what we're seeing in other Canadian markets which is a factor that's harder to handicap. I don't currently have a position, but it's interesting to follow. [link] [comments]  |
| Posted: 26 Mar 2019 08:59 PM PDT |
| DE Shaw: Inside Manhattan’s ‘Silicon Valley’ Hedge Fund Posted: 26 Mar 2019 09:57 AM PDT |
| No disconnect between growth and value Posted: 26 Mar 2019 12:53 PM PDT Going to be a contrarian here, but is it just me or are the underperformance by value managers just them being too afraid to touch tech companies. Today, the most profitable companies with gobs of cash flow are tech companies and they are trading at very reasonable valuations (sans Amazon). Tech seems like a no brainer as they are both cheap, highly profitable and have pretty high moats. Apple today is trading at like 10x PE net cash and have tons of room to grow (such as in the financial space by cannibalizing traditional banking and can increase ARPU by selling other accessories). [link] [comments]  |
| Michael Mauboussin – The Four Sources of Alpha Posted: 26 Mar 2019 04:11 AM PDT |
| Activists nominate five directors to TransAlta board in bid to derail Brookfield investment Posted: 26 Mar 2019 02:02 PM PDT |
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