A Breakthrough in Targeted Innovation
Conquering Innovation Fatigue: Now at Amazon!
Conquering Innovation Fatigue is a new book on strategy and innovation published by John Wiley & Sons. Its authors, Jeff Lindsay, Cheryl Perkins, and Mukund Karanjikar, bring decades of experience and diverse backgrounds together to reveal new insights and strategies based on understanding the personal side of innovation. See what leading experts in business and innovation say about the book.
Supporting blog: InnovationFatigue.com
My RSS Feeds
Mining Stock Royalties: Don't Fret Yet
Some mining stocks and energy stocks such as Canada's Advantage Energy Income Fund (AAV) may be converting over to regular companies instead of being royalty trusts that pay most of their profits to investors as dividends. This may seem like bad news to those who invested for the royalties, but in this era of very tight credit, it can be a wise way to fund future growth and lay a foundation for a higher profits in the future. When a company like AAV announces that they will be stopping dividends altogether, first find out why. If it is because the company is no longer profitable and is on its path to economic doom, OK, sell. But if the company has good production, good resources, and is generally healthy but needs more money to grow, it may be a buy - especially after the market overreacts in dumping the stock. Consider buying some within an hour of the bad news, when a very sharp downward spike may occur, or about two days after, hoping to catch a second down day. After maybe 15-30% of the stock price has been trimmed, it may be a screaming buy.
In AAV's case, there is the risk of more dilution of the stock and further dumping by those wanting dividends. May be too early to buy, but I bought some yesterday anyway, motivated by my belief that energy prices have to fly upward in the future due to a lack of new drilling, increased burdens for exploration and development, increasing money supply (inflation), and a likelihood of international demand increasing with global supply challenges.
The Canadian Royalty Stocks (Canroys) are especially likely to follow AAV's route since the Canadian government has foolishly decided to change their tax status starting around 2011, as I recall, making the lucrative dividend stream from these energy stocks more difficult to sustain. That has already been priced in to most of these companies, in my opinion. I think they are still good to own - especially after they convert to regular companies instead of royalty stocks.