Investor Email: Are there Problems with ARD?
Write to me at Doktor_Stocks@yahoo.com
XXXX from xxx@charter.net wrote:
Dok It sounds like you are down on ARD, as is the price of ARD. Something must have changed your mind rather quickly, like the CEO selling somestock. Any other ideas? My email is xxx@charter.net. I am just a simple investor trying to make money.....Thanks in advance for your thoughts.
XXXX,
Its not that I"m necessarily down on ARD. Rather the reason I sold 26% of my ARD holdings was due to the fact that I have found a company with stellar fundamentals that is significantly undervalued in relation to intrinsic value. So basically the fundamentals are superior to that of ARD. Also the other company has a gap between current share price and intrinsic value that is greater than that of ARD. In other words this other company is where ARD was back in 2005 in terms of attractiveness.
Keep in mind that up to this point of 26% of my ARD portfolio being sold I held a very concentrated position in ARD. By shifting some assets out of ARD and into the other company I was not only able to capture some better fundamentals and with a larger degree of undervaluation but I was also able to diversify. This is something I've always wanted to do but not at the expense of investing in a company with inferior fundamentals, future growth or current share price discount to intrinsic value.
On the other hand there have been some events at ARD that have pushed me to search for other investment opportunities. These events include the eventual slowing in future production growth, the creation of a $160,000 a year senior management position (increased G&A), challenges with production in Q4 (there were valid excuses), Tim Rochford selling a major portion of his common shares in 2007 and lack of clarity on status of exploratory well on the Syracuse property in Kansas.
Also I have certain expectations in order to maintain my high degree of investment in ARD going forward. These include but are not limited to the following:
1. Oil in Kansas. Lack of commercial oil production in Kansas would not make me happy. Given the massive acreage in Kansas I would like to start seeing some production from this region. This would also serve to take some of the load off the shoulders of the production at the Fuhrman-Mascho.
2. Q4'06 EPS of at least $0.36. This is a conservative estimate. If ARD comes in below this figure then you know there are some problems with rising costs. Rising costs that I consider to be significant will not be tolerated.
3. Proved Reserves Report for 2006 that has Year over Year growth of at least 40.2%. Anything less than 40.2% growth in proved reserves is an example of actual results coming in below expectations based on information provided by Tim in the previous quarterly conference calls. This report is crucial. It is an indicator as to your piece of the asset pie. The larger the numbers the larger your piece of the pie.
With everything said I still maintain a massive position in ARD. I have a higher percentage of my net worth in ARD than does Tim Rochford or Stan McCabe assuming they take their stock sales and diversify into other investment opportunities. Make no mistake about it: There is no better investment opportunity in the E&P sector right now that has a better combination of superior fundamentals and discount to intrinsic value than ARD.
I still believe in the concept of peak oil. ARD is the most efficient investment vehicle to capitalize on rising future oil prices.
However, we still need to keep our fingers on the pulse of ARD. We need to constantly pay attention to fundamentals and share price discount to fair value. When fundamentals deteriorate and/or share price exceeds fair value then one really needs to have a plan of action. In other words you need to have an idea where to move investment dollars. I currently have a plan with my nickel producing company. I will reveal the name of this nickel producer at or before the release of Q4'06 results. At that time I will discuss the company in more detail.
Until then, sit back and try not to let the volatility of today's markets bother you.
Dok
Write to me at Doktor_Stocks@yahoo.com
XXXX from xxx@charter.net wrote:
Dok It sounds like you are down on ARD, as is the price of ARD. Something must have changed your mind rather quickly, like the CEO selling somestock. Any other ideas? My email is xxx@charter.net. I am just a simple investor trying to make money.....Thanks in advance for your thoughts.
XXXX,
Its not that I"m necessarily down on ARD. Rather the reason I sold 26% of my ARD holdings was due to the fact that I have found a company with stellar fundamentals that is significantly undervalued in relation to intrinsic value. So basically the fundamentals are superior to that of ARD. Also the other company has a gap between current share price and intrinsic value that is greater than that of ARD. In other words this other company is where ARD was back in 2005 in terms of attractiveness.
Keep in mind that up to this point of 26% of my ARD portfolio being sold I held a very concentrated position in ARD. By shifting some assets out of ARD and into the other company I was not only able to capture some better fundamentals and with a larger degree of undervaluation but I was also able to diversify. This is something I've always wanted to do but not at the expense of investing in a company with inferior fundamentals, future growth or current share price discount to intrinsic value.
On the other hand there have been some events at ARD that have pushed me to search for other investment opportunities. These events include the eventual slowing in future production growth, the creation of a $160,000 a year senior management position (increased G&A), challenges with production in Q4 (there were valid excuses), Tim Rochford selling a major portion of his common shares in 2007 and lack of clarity on status of exploratory well on the Syracuse property in Kansas.
Also I have certain expectations in order to maintain my high degree of investment in ARD going forward. These include but are not limited to the following:
1. Oil in Kansas. Lack of commercial oil production in Kansas would not make me happy. Given the massive acreage in Kansas I would like to start seeing some production from this region. This would also serve to take some of the load off the shoulders of the production at the Fuhrman-Mascho.
2. Q4'06 EPS of at least $0.36. This is a conservative estimate. If ARD comes in below this figure then you know there are some problems with rising costs. Rising costs that I consider to be significant will not be tolerated.
3. Proved Reserves Report for 2006 that has Year over Year growth of at least 40.2%. Anything less than 40.2% growth in proved reserves is an example of actual results coming in below expectations based on information provided by Tim in the previous quarterly conference calls. This report is crucial. It is an indicator as to your piece of the asset pie. The larger the numbers the larger your piece of the pie.
With everything said I still maintain a massive position in ARD. I have a higher percentage of my net worth in ARD than does Tim Rochford or Stan McCabe assuming they take their stock sales and diversify into other investment opportunities. Make no mistake about it: There is no better investment opportunity in the E&P sector right now that has a better combination of superior fundamentals and discount to intrinsic value than ARD.
I still believe in the concept of peak oil. ARD is the most efficient investment vehicle to capitalize on rising future oil prices.
However, we still need to keep our fingers on the pulse of ARD. We need to constantly pay attention to fundamentals and share price discount to fair value. When fundamentals deteriorate and/or share price exceeds fair value then one really needs to have a plan of action. In other words you need to have an idea where to move investment dollars. I currently have a plan with my nickel producing company. I will reveal the name of this nickel producer at or before the release of Q4'06 results. At that time I will discuss the company in more detail.
Until then, sit back and try not to let the volatility of today's markets bother you.
Dok
posted by -Aztec- at 8:55 AM
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