Thursday, September 30, 2010

Portfolio Update September,2010

September was yet another boring month. Only activity in my portfolio was to sell BBEP at beginning of the month. I have been very busy at work and have hardly got time to look into more investment ideas. As you can see with over 50% of portfolio in cash I need to find good investments. But having a lot of cash is a good problem so long as you have the perseverance to wait for the right opportunity.

I wrote my opinion on BBEP`s valuation before here. The DCF value of the stock is between 16 and 21. But DCF does not take into account the leverage required to achieve the cash flows. At EV/FCF of 10 it certainly wasn't cheap. The positives that might drive the stock higher is relatively low inflation and demand for high dividend paying investments. The negatives that might tank the stock maybe high interest rates(has $552M of floating rate debt) without natural gas prices shooting up because of excess supply. Also there is an overhang of california increasing taxes on the oil production which would screw low margin producers like BBEP. BBEP has 10% of its production from california. Also the CEO sold 30k shares at 17.2 on August 23.I sold my entire position at 17.39. I might have sold too early but I was happy with the price I got for my shares. Here is my history of buys and sells with BBEP stock.

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