Money and Investing Thoughts

Agean Marine (ANW: 5.44 +0.22 +4.21%), a member of my 20 Stock Portfolio, made some pretty wild gyrations. When I reviewed the stock on Sept 14 the price was about $26, it then proceeded to go generally nothing but up, peaking at $48 on Oct 18. Too bad I did not actually buy some! Over the last week, however the stock has fallen to $36 before recovering today to around $41 and a 1/2.

The gyrations seem to be a result of the major stockholder registering to sell 7 to 8 million of their shares. The company has also announced a quarterly earnings report to be released on Nov 7. I think ANW has excellent long term prospects, but it appears any short term earnings surprises (positive ones!) have been built into the stock price. Several Wall Street analysts have jumped on the bandwagon lately, increasing my concern over the short term price. Not that I really have a concern, I do not own any stock yet. I hope to in the near future, and a strong price pull back would be welcome to me personally.

I have started the 20 Stock Portfolio to track through this blog stocks I find of value and interest. Most of the stocks I own are in the portfolio but I do not own all of them.

From now on I will refer to this company by it’s NYSE symbol: ELP. I am learning Spanish, but do not have enough of a handle on it to decipher Portuguese. Back to (ELP: 23.11 +0.02 +0.09%): I have wanted to add some emerging market companies to my 20 Stock Portfolio, for both diversity and growth prospects. I have a strong interest in South America, which leads me to Brazil and Chile. Brazil stands out for the tremendous profitability and growth of the companies there. ELP is the sole electric utility for the Brazilian state of Parana. The company has a market cap of either $2.2 billion or $4.6 billion (sources vary). Here are some of the facts and figures I dug out of the obtuse (at least in English) financial reports and some other sources:

• Net earnings have been doubling for the last 4 years. 2007 through the first two quarters shows flat earnings from 2006.
• Earnings can fluctuate wildly quarter to quarter. I attribute this to seasonality and capital spending.
• The company has 30% of the common stock owned by the state of Parana. The state owns almost 70% of outstanding stock if you count preferred shares.
• Gross profit margins are around 40% of revenues.
• Dividends paid have also been doubling each of the last 4 years.

What I see is a very profitable company with a monopoly to provide a necessary service in an economically growing area. Being partially owned by the local government cannot hurt ELP’s continued profitability. I also like the fact that Brazilian corporations are required to pay out a portion of their profits as dividends. I do not know how much they are requred to pay, but the payout definitely will grow if profits do.

The one troubling fact is that 1st have profits are down from 2007. First quarter was up 65% from 2006 and they were way down in the 2nd quarter compared to a very profitable Q2 in 2006. The stock share price took a hit in August when the news can out, but the share price has been rising since then.

I think this $2 or $5 billion stock should become a $10 billion market cap stock and I am adding it to my hypothetical 20 Stock Portfolio.

I currently do not have a position in ELP.

*Price data courtesy of Capital IQ. Returns from Aug. 14, 2000, to March 15, 2003.

I have copied the above chart from a Motley Fool article that I found interesting. It tracks a shows how the different disciplines/sectors performed during the last bear market. Of striking note is the out performance of small cap dividend paying stocks.

My personal search for outstanding companies and stocks tends to put me in this camp. I like above market dividends from companies not well followed by Wall Street. Large caps get pummeled in mass when the market turns and none dividend paying stocks have no “floor” to hold them up when the bears blood is up. “Metaphor attack!!!”

The current bear market fear seems to be unfounded, but it is good to own a range of stocks that can out perform in good times and bad.