When I write my first book, there will likely be a chapter dedicated to CPN. Oh, the lessons I learned back in the day. On my recommendation, we bought the stock below 30 if I recall and quickly rode it to 60. I know we trimmed some, but we held on. I had caught the company cheating and called them out for it on a conference call, resulting in my my being blackballed by the company and never allowed on their public conference calls. I should have taken that as a sign, but the story was just too great. Well, you'll have to buy the book to hear the rest of the story, but let's just say it didn't end pretty.
Fast forward to yesterday, and this was really my first time to give serious thought to the company since they emerged from bankruptcy in 2008. We discussed the company in an investment committee meeting last year with one of my clients, but we couldn't get our hands around their exposure to gas prices. As one who believes that gas will be abundant and cheap for years to come, I am always looking for potential beneficiaries. From my view, gas prices were terrible in 2010, well below what was expected, yet the stock was up only marginally at the time we were looking at it. What I missed is that they were hedged and not really benefiting. Also, power prices remained depressed.
Back to yesterday, they had an analyst meeting. I shared my thoughts on Seeking Alpha, if you are interested. I am adding them to my watchlist (time to say goodbye to ALE). The valuation is a bit high (almost 10X EV/EBITDA), but I think that their EBITDA growth could really pick up in the coming years. Most importantly, I really liked the CEO. He is a long-time industry veteran, and he really put his money where his mouth is (buying over $8mm of stock - 500K shares - out of his own pocket when he joined. He has a lot more exposure through options he received. I spent time talking to the CEO, CFO and also another important executive (in my view),and I think that the story is pretty solid, though complex.
Comments
You can follow this conversation by subscribing to the comment feed for this post.