Is there a hotter sector?

[Nepa]

Than the IPP's right now? DYN MIR CPN RRI take your pick they are all hot.

[scalf]

/forums/images/icons/shocked.gif nepa...you just cannot mention stocks like mir, cpn, cnp...you'll get laffed out....lol...wanta be an expert anfd respected...say you're putting all your money in motorola...lol...gl...remember cnp also just spun off tgn...so their gain is more than just price gain of stock...lol...gl /forums/images/icons/grin.gif /forums/images/icons/smirk.gif /forums/images/icons/diamond.gif

[Nepa]

your right, I may be out of line. I just got a little excited because the sector is on fire since the beginning of the year. I believe a few of these stocks are easey 5 baggers and that is why I mentioned them.

P.S. As far as MOT, I have No Comment on that stock. But I do own a Nokia phone. Good luck all and Happy Trading! /forums/images/icons/cool.gif

[Ray Zee]

easy 5 baggers? i guess the market bubble is yet to burst.
i think everyone needs to consider why they are trading or buying stocks. is it for investment or to gamble.

[Zeno]

You Stated: "I just got a little excited because the sector is on fire since the beginning of the year. I believe a few of these stocks are easey 5 baggers and that is why I mentioned them."

I'm new to this game so I need some clarification.

Question 1. What the hell is a 5 bagger? Is it a really, really ugly girlfriend or a duck hunting excursion in which you haul back 5 ducks in a gunnysack.

Question 2. How can a "sector" be on fire or hot? Is there a rational basis for this sector fire? - or is it driven by irrational mass greed, hysteria, get rich quick hopes, and other quaint human characteristics.

Question 3. Of the stocks you mentioned - which one is the hottests or most on fire. I want to buy it. Thanks.


-Zeno

[adios]

"Question 1. What the hell is a 5 bagger? Is it a really, really ugly girlfriend or a duck hunting excursion in which you haul back 5 ducks in a gunnysack."

Say you buy a stock at $5 a share. It goes up to $25 eventually (maybe it's $30) and you have 5 bagger.

"Question 2. How can a "sector" be on fire or hot? "

In this particular case the IPP (Independent Power Providers) were buried, crushed, annihilated and whatever other similar adjective you can thing of last year as a result of all the scandels that started with the Enron debacle. Perhaps there's a perception now that the worst of their problems are behind them and that they have been beaten down too much. Sectors tend to be loosely defined so you have to be careful although in this case it's fairly obvious who the main IPP companies are. Stocks related to Gold production are another "hot" sector due to the spike in the price of gold. Biotechnology stocks might get "hot" if some scientific break through occurs. Hope that helped.


"Is there a rational basis for this sector fire? - or is it driven by irrational mass greed, hysteria, get rich quick hopes, and other quaint human characteristics."

Their might be a good reason for buying to pick up e.g. the IPP sector may have been beaten up too much or some news event changes the fundamental outlook. Eventually it seems that mass greed, hysteria, get rich quick hopes, etc. come into play. Personal disclosure is that I own none of the IPP's. They seem interesting but everytime I look at their balance sheets they seem awfully risky to me. For instance when I look at CPN:

Balance Sheet Items:

Long Term Investments $1,170,887,000

Property Plant And Equipment $17,724,874,000

Long Term Debt $13,557,512,000

Tangible Book Value $3,891,892,000

From last 4 Quarter Income Statements (latest to earliest):

Earnings Before Interest And Taxes
$291,653,000 $175,133,000 ($56,223,000) $187,304,000

Interest Expense
$110,743,000 $67,058,000 $61,311,000 $52,409,000

------------------------------------------

CPN's book value is $10.30 a share and went out yesterday at $4.22 a share. A big discount to book value but admittedly I really don't know enough about the company to make an informed opinion about earnings going forward.

[Nepa]

Tom,

Great post, These stocks are risky, some of them are very risky. There is massive debt on most of the books of these IPP's. With that being said, I do own one of these stocks and it is MIR. I do realize that there is a chance for BK but I'm willing to take that risk. MIR is only a small portion of my holdings but I believe (Now this might just be me so don't go out buying unless you know what you are doing!) could do really well for me as a LONG TERM INVESTMENT. I could change my mind in the future. ie. someone finds out that MIR has the books cooked, which ,I would have a hard time believing because the SEC has gone over them with a fine tooth comb. Plus, there are some other problems that can arise in the future. ie. credit problems GOOD LUCK and Happy trading!

[Wildbill]

How many times have I talked about this sector before??? /forums/images/icons/grin.gif

Ok, you touched on just one of the problems. Debt is huge, but its often misleading. Part of the problem is that the accounting is such that its hard to get a good idea where a company is. While Enron was lying and cheating, they still had a lot of legitimate business going on that from an accounting standpoint looks horrendous. Problem is that you take on debt to get capacity, but its secured debt. These guys have to take on massive debts because their business calls for buy now, get paid later in an equally massive way. That is why Enron and the others were trying hard to get into the pure trading side of it. There you aren't really buying or selling anything, you are just a broker. These IPPs are buying now and selling later, hoping things don't collapse on them. Their biggest issues, IMO, are two things. First the regulators are idiotic and nightmarish. They change the rules all the freaking time. Its what way the wind is blowing this week...well it was back in the "crisis" days. What was thought of as normal business is now called corrupt practices because they were "mean-spirited". Whatever, if they didn't want that they should have never deregulated the damn thing! Regulators are just a mess in this business and they are forced to play politics way too much. Their decisions can eat up an IPP alive in very short order so that is the biggest risk. Second you have to worry about what the Enron and others implosion did to the market. They basically took the trading market over and when they left it went back to its old ways of very high costs and a lot less capacity. Now its all about long term contracts. Well that sounds great, except many IPPs made deals that their partners now want to unwind saying they did them under duress. Well sorry, but the IPP made deals based on one model price and now you want to pay pennies on the dollar? Oh that sucks to be the IPP if the courts give them that. Without a live trading market no one can deal with these issues and there is no good spot price to rely on and it makes the problem worse. Once again politics enters the issues.

In all remember when you are doing valuations there is a lot more to the numbers than just what you pick up at first glance. These are industries not only facing uncertain debt loads, but changed business models. Their former biggest customers and reason to survive are gone out of business and their current biggest customers are asking for things that could lead them to the same fate. In this context of course there are 5 bagger possibilities, I don't think anyone is realizing how easily it could all go wrong. To offset that you have to have big risks with big rewards. The reason such a sector gets hot is its early in the year and investors and institutional money is out trolling. They are free of reporting requirements until March and are always much more aggressive early thinking a mistake and they still have many months to make up for it, so their appetite for risk is high. Maybe a few good rulings and you will see a nice pop in these names, but just one bad thing happening and you will have worthless paper so be very very careful.

[Zeno]

Tom,

Thanks for answering my questions. I feel I can now make a more informed decision.

-Zeno