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Filling out Encana stake [ClearOnMoney]
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Filling out Encana stake

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Investment

Filling out Encana stake

26 Jan 2012 by Jim Fickett.

The stock is volatile right now, but I will probably add another 1% of the portfolio to my stake in Encana on Thursday. I'll write up more detail later, but the short story is:

  • As written earlier, the current price assumes Encana will only recoup capital expenditures on current reserves, and will make no profit on other resources. That provides a very large margin of safety.
  • The current CEO, Randy Eresman, was COO 2002-2006 and CEO 2006-present. From 2002 to 2011 investor returns come out to CAGR 11%. (This assumes that dividends were reinvested and, at the time of the Encana/Cenovus split, all Cenovus shares were sold and reinvested in the new Encana.) So, though I do have some complaints about company management, it is hard to argue with the results.
  • I suspect the effect of public worries about fracking will be to increase regulation and the cost of doing business for all gas companies. This cost will be passed on to the consumer.