Jump to content



Photo

Royalty Trusts


  • Please log in to reply
37 replies to this topic

#31 SilentOne

SilentOne

    Member

  • Traders-Talk User
  • 3,452 posts

Posted 18 December 2006 - 08:07 AM

Hi dougie,

I sold down a bunch of my trust positions on Friday. I still hold about 1/3 of what I bought last month. The number one reason for profit taking is that, IMO, the Government is unlikely to back off at all on the their trust policy, even if it leads to further political turmoil. Flaherty is digging in. So that is taking way some near term optimism.

The number two reason is the reversal in ECA on Friday. Whether the downgrade on ECA created a stock specific situation, I am not sure. But I have seen many comparisons of energy trust valuations based on the likes of ECA. If they are selling ECA, I want to be careful with energy trusts in general.

The third reason is natural gas. It has rolled over here and could be weak for a period.

The fourth reason is tax loss selling is not over yet, and there could be some more selling/squaring of positions in the coming week.

And the fifth (which should be number #1 really), is that there are no clear buy signals on any of these positions. So with so much uncertainty and doubt, I would rather reduce exposure.

I sold positions in AET.UN, FEL.UN, and YLO.UN for trading profits. I still hold a big position in SND.UN because it is so undervalued (ie. large tax pools etc.) and my cost base is around $5.00. I hold PEY.UN primarly because I am slightly underwater on the position and willing to hold it in our RRSPs.

I guess we will see what comes this week. Note that there are no clear buy signals on these trusts, at least with the indicators I like to use. Also the bollingers are now compressing price in many of these trusts, so we are about to get a decent move up or down.

Posted Image

Posted Image

Posted Image

Posted Image

Posted Image

Posted Image

So factor all this and let's not mention that the general market keeps rallying and is bound to hit some selling in the next little while.

cheers,

john

Edited by SilentOne, 18 December 2006 - 08:10 AM.

"By the Law of Periodical Repetition, everything which has happened once must happen again and again and again-and not capriciously, but at regular periods, and each thing in its own period, not another's, and each obeying its own law ..." - Mark Twain

#32 PorkLoin

PorkLoin

    Member

  • TT Member*
  • 2,194 posts

Posted 18 December 2006 - 12:16 PM

John, agreed on what you say. I'm trying to get Peyto for a low price. Should it revisit that $16.60 area I'd buy more. I see that $NATGAS is down some today and ECA is taking another whacking. So much the better, I say. With trusts I've sat through all but two periods of weakness in many years, the big dividends making up (and more than making up) for lack of buy signals, etc. If things are different now then I will suffer in the future. I hear you on the Cdn. gov't. I weigh that against my long-tem view of gas and oil which is bullish. I like those dividends... :blush: Best, Doug

#33 mss

mss

    I'M WATCHING

  • TT Sponsor
  • 6,176 posts

Posted 18 December 2006 - 12:48 PM

I like those dividends... :blush:
Best,

Doug

:)
What are the thoughts of you two guys on PDS & FDG?? ;)

Thanks,
WOMEN & CATS WILL DO AS THEY PLEASE, AND MEN & DOGS SHOULD GET USED TO THE IDEA.
A DOG ALWAYS OFFERS UNCONDITIONAL LOVE. CATS HAVE TO THINK ABOUT IT!!

#34 SilentOne

SilentOne

    Member

  • Traders-Talk User
  • 3,452 posts

Posted 18 December 2006 - 01:18 PM

Hi mss, FDG.un is one that I have been watching. It swung to a buy signal but will probably pullback in the ST. PDS is compressed for a move and it is without a clear buy signal. I'd wait through this week to see what comes. The warm wheather this past weekend is likely to impact NG inventory levels that come out Thursday. Also add tax loss selling into xmas? cheers, john

Edited by SilentOne, 18 December 2006 - 01:19 PM.

"By the Law of Periodical Repetition, everything which has happened once must happen again and again and again-and not capriciously, but at regular periods, and each thing in its own period, not another's, and each obeying its own law ..." - Mark Twain

#35 PorkLoin

PorkLoin

    Member

  • TT Member*
  • 2,194 posts

Posted 18 December 2006 - 01:48 PM

Hey Scott, PDS -- 13% dividend, yummy. But daily chart is rolling over a little. I'd wait and see if it could be bought down around the recent lows...? Fording -- it's been paying out almost all its distributable cash in dividends, which is a danger signal. It too has had over a 50% decline from its high, but I'd bet on a dividend cut and a share price decline, perhaps down to the recent lows, coincidentally in the 22 area, same as for PDS. I haven't been following coal prices but in the long run I'm a big bull there. Dividend is about 15%, I'm guessing it'd go to 12% or so. (Despite my hankering for more Peyto, the uranium arena is where I'm really looking to buy more stuff. Got another $2.50 rise last week in uranium oxide...) Best, Doug

#36 SilentOne

SilentOne

    Member

  • Traders-Talk User
  • 3,452 posts

Posted 19 December 2006 - 09:13 AM

Income trusts debate finished, Flaherty declares

STEVEN CHASE AND BOYD ERMAN
Monday, December 18, 2006
Federal Finance Minister Jim Flaherty closed the book on the income trust tax debate Monday, saying that lobbyists are wasting their time seeking concessions and declaring the final chapter was written last week when Ottawa released operating rules for the sector.

“That's the end of the story,” he said Monday following a speech to the Vancouver Board of Trade.

All that's left is the legislation that Ottawa must pass to support the trust tax, Mr. Flaherty said. But he emphasized this won't diverge from plans the Conservative government first announced on Halloween.

“The legislation will conform with the announcement of Oct. 31 and no one should expect anything else,” Mr. Flaherty said, adding he still hopes to release a draft bill before Christmas for consultation.

The Canadian Association of Income Funds said Sunday it's not giving up its fight against the trust tax, which applies to new trusts in 2007 and existing ones in 2011.

Many income trusts slumped Monday in Toronto Stock Exchange trading as it became clear that Ottawa would not back down on its vow to tax income funds starting in 2011. The S&P/TSX capped income trust index fell 1.2 per cent, its biggest drop in four weeks. Investors had pushed up trusts prices late last week on optimism that the Tories might relent.

Mr. Flaherty said business people he met Monday in Vancouver “uniformly” told him the trust tax was the “necessary thing” to do.

“This was not something we could let continue, where our country would become a coupon-clipping, passive economy. That's just not in the best interests of Canada.”

Mr. Flaherty added the Tories are firm in their resolve to enact the trust tax as announced, stressing he's been taken aback that some believed they could persuade him to extend the tax-free grace period for existing trusts to 10 years from four.

“I've been surprised actually that since Oct. 31, some people have entertained the notion that there might be any extension whatsoever from four years.

“There will not be ... No one should hold out any false hope of that happening,” he said.

He said trusts had plenty of time to make their case for treatment under the operating rules he announced last week, measures that allow trusts to double in size over the next four years and convert back to public corporations with no tax hit.

“The rules are fair and flexible — and as I said on Friday, in fact they are generous,” he said.

Many trusts are getting on with business and growing, even if it means that they run afoul of the new guidelines on growth.

Colabor Income Fund, a Quebec food distributor, said it expects a planned acquisition and financing will put it over the growth limits, but is set to go ahead even though it means the fund will probably have to start paying income tax as of Jan. 1.

Colabor, when it announced the plan to purchase a division from Cara Operations Ltd. last week, was among the first income funds to challenge the federal government to come out and say what the rules were.

While the rules that Mr. Flaherty set out on Friday were more generous with growth than many in the sector anticipated, they were still tight enough that they will probably ensnare Colabor.

“There is a strong likelihood that [the financing for the Cara transaction] will be interpreted by Finance of the Canada Revenue Agency as an ‘undue expansion,' ” the fund said.

Nonetheless, it plans to go ahead with the purchase, saying it will add to the cash available to distribute to investors even after taking into account paying tax.

There is still some hope in the trust community that, despite Mr. Flaherty's determination, the tax plan will falter on its way through the legislative process.

“Political uncertainty could surround the income trust asset class for an extended period of time,” Canaccord Capital Inc. trust analyst Chris Rankin wrote in a report that noted an election could be called at any moment and that the proposal hasn't faced Senate scrutiny.

In the meantime, analysts and investment bankers said smaller income trusts, especially those in the oil patch, will become takeover targets of larger income funds that can issue more units under the new rules, which are based on allowing trusts to double in size.

“The smaller you are, the more limited you are in opportunities to grow, so you'll probably see a lot of small mid-cap trusts combining,” one investment banker said.

Daylight Resources Trust, Thunder Energy Trust and Vault Energy Trust are among the likely targets, according to Canaccord.


"By the Law of Periodical Repetition, everything which has happened once must happen again and again and again-and not capriciously, but at regular periods, and each thing in its own period, not another's, and each obeying its own law ..." - Mark Twain

#37 SilentOne

SilentOne

    Member

  • Traders-Talk User
  • 3,452 posts

Posted 02 January 2007 - 03:06 PM

doug,

Here's an update from my last post Dec. 18th. Natural Gas has rolled over and we can thank the wonderful warm weather you seem to be having over there.

Posted Image

I blew out the remaining positions in the energy trust sector. I had some PEY.UN with a mental stop at $17.5 which I took out last week and today.

Posted Image

I also gave up on SND.UN as I have a mental stop of $5.00 and the units look like they are on a shelf which is about to give.

Late Feb. could be the next window for an oil & gas sector low. We'll revisit things then.

cheers,

john
"By the Law of Periodical Repetition, everything which has happened once must happen again and again and again-and not capriciously, but at regular periods, and each thing in its own period, not another's, and each obeying its own law ..." - Mark Twain

#38 PorkLoin

PorkLoin

    Member

  • TT Member*
  • 2,194 posts

Posted 02 January 2007 - 03:41 PM

Hey John, Thank you for the update there -- you were right about NG and the eastern US is sure having an easy winter (thus far). The trusts are not acting strong here -- yeah, "shelves" in SND and Peyto too. SND would go for 4.50, I would think, and then we'd see. Peyto.... $15, $12.50? No in-and-out trading for me with the trusts, at least for awhile. If anything, I'd look to add to positions should we get further breakdown. Meanwhile all the money I have free is looking for places in the uranium sector. Thanks again for Alberta Star -- read your post, bought some, it's up 15% in less than a week. Doug