I agree with Ethan. Those reasons are partially why I sold out at $40.
I agree with Ethan. Those reasons are partially why I sold out at $40.
Can anyone enlighten me on why everyone still seems to love this stock? My cursory analysis tells me not to touch it with a 10-foot pole. P/E nearing 50, PEG of 2, shaky financials which Ethan described and their hugely controversial pipeline project. It just doesn't seem like a set it and forget safe DRIP stock like many are insinuating. I see a lot of potential downside.
Congrats to everyone who got in early and enjoyed the run-up but I don't see a great future ahead. Just my opinion.
@GOB, you have to compare the fundamentals to stocks in the same sector. Simply saying that P/E is 50 means nothing. You have to realize that a P/E of 50 is a perfectly fine for a pipeline company (in fact it's the average). ENB is forming a nice base in the 38-39 range and has a huge potential for breakout within the next 3 months.
Is it though? TRP is 23 and IPL is 19, just as a quick comparison. The PEG shows that the stock isn't really priced attractively based on their growth expectations.Originally Posted by arc
It's also possible that an entire sector is overvalued and sells off, and this may be the case with pipelines. Comparing within the sector may allow you to choose the best stock of the sector, but that may not help when the entire sector sees funds moving out of it. What are your reasons for believing ENB is the best stock in their sector? Again, I've just done cursory research so I'm not saying you're wrong, but I'm still curious why this stock is loved so much at these levels.
Well I'm not so sure its loved. They tried to put out an equity issue at $41 and the market balked pretty hard and it was undersold. Any P/E over 20 deserves scrutiny - I've sold off both ENB and TRP for valuation reasons and currently the only utility I'm still holding is Fortis - their P/E is about 18-19.
I sold out of Enbridge this morning after 2 years of ownership. My split adjusted cost base was $27.30 so I had a good run. The problem for me with Enbridge is the valuation as I alluded to in an earlier post. I'm also concerned that the growth prospects for large pipeline companies (ENB and TRP) is being restriced by politics and environmentalists. Even if Northern Gateway or Keystone XL go through, costs will be higher than ever before due to the amount of scrutiny these companies now face.
For that reason I decided to buy a pipeline well loved by this board, IPL.un. It is a smaller pipeline, with a PE under 20 and a payout ratio of less than 100%. IPL.un's expansion projects barely get mentioned in the media, they aren't the target of environmental groups and the regulatory review proces is much less stringent.
It's too bad that Enbridge and TransCanada are having such difficulties building further pipelines. I am of the opinion they would be a great benefit to our country, reducing the bottleneck at Cushing and diversifying our customer base will bring much higher prices for Canadian oil producers. Under these circumstances, I feel that better returns can be generated by the smaller pipelines that fly under the media and environmentalists radar.
Last edited by Ethan; 2012-10-01 at 02:42 PM.
We've held IPL.UN since Feb 2009......paid $7.23.....thus far up 195.85%.......well loved indeed!
I agree about better returns with smaller companies as this approach has worked very well for me, especially the last couple of years. However, not ready to part with either ENB/TRP, which I have been holding since late 09 [hope I won't regret my decision].
Last edited by Toronto.gal; 2012-10-01 at 03:26 PM.
“Simplicity is the ultimate sophistication.”
Enbridge has been upgraded to outperform by a couple analysts (even at these levels! ).. the company says its growth could exceed 10% goal, over the next four years.
Of course, this is already priced in. Stock is back up in the 40's on this.
http://www.dailypolitical.com/financ...ubs-ag-enb.htm
http://www.stockhouse.com/natural-re...as-h-p-tu.aspx
Bring on those 15% dividend increases!
http://www.theglobeandmail.com/globe...rticle4585643/
This article mentions that they now expect a 12% increase in earnings....But as Ethan mentioned, I don't expect the same for the next dividend increase. I do think that ENB feels their annual dividend increases are not meaningless, which is part of why I continue to hold them.
Although I am not in any way stating that it is a single horse race, as mentioned there are a few good options out there for this sector.
Posting Permissions
Reply With Quote