Sorting out for good values WMB...

Discussion in 'Trading' started by CartelTrader, Jul 23, 2002.

  1. This is something I have been looking at.

    Please tell me if I am mistaken:

    <b>Williams Cos (NYSE:WMB)
    11:31am ET Price $1.26 (down 0.75 (37.31%))
    Day's Volume: 22,664,200

    Sector: Utilities
    Specific Industry: Natural Gas Utilities

    Price History
    52 Wk. High ($) 34.41

    52 Wk. Low ($) 4.65

    3 Mth. Average Daily Vol (Mil) 6.56

    Beta 1.03

    Share Related Items
    Market Cap. (Mil) $ 2,664.22

    Shares Outstanding 516.32

    Float (Mil) 511.20

    Financial Strength
    Current Ratio (MRQ) 1.04

    Total Debt/Equity (MRQ) 2.47

    <center><i>Per Share Data
    Earning (TTM) $ 1.03

    Sales (TTM) $ 19.86

    Book Value (MRQ) $ 11.18

    Cash (MRQ) $ 3.30

    Dividend Information
    Last Dividend 0.20

    Indicated Annual Dividend $ 0.80

    Dividend Yield % 15.50</i> </b></center>

    I don't see how this can turn out to be another Enron and if anything could turn out to be a good buying opportunity.

    Comments or abuse please...

  2. I'd like to hear some feedback here too. It seems that it's a liquidity crunch. Just look at the sp downgrade of debt recently. I have to think that assets are worth more than the share price. It has a lot of debt due pretty soon. I don't think anyone will be able to refinance them on good terms.
  3. Obviously, due to Enron, the market is taking the entire sector to the woodshed.

    So are stocks like MIR, CPN, CMS, AES, WMB, EP, EE, DYN, CMS, SO and other electic and gas utilities have taken a major hit.

    Do they deserve to be trading at these price levels, given where they have traded in the past?

    One of the keys right now, during this shakeup period, is liquidity going forward. Remember, even if Enron wasn't doing something illegal/fraudulent/or deceptive, they were running out of money.

    Taking a look at the debt to equity ratio is important. Looking at revenues helps too.

    One of the key components when looking at broken stocks is insider selling. If the important executives are buying the stocks, that shows a belief in the company going forward, and confidence that the books aren't cooked.

    If on the other hand, you see net selling, stay away.

    Just my opinion, based on having not paid attention to these two very important factors.

    I ignored the debt with Enron, and the downgrades by Moodys and other credit rating organizations, because I really did not fully understand how much poor credit costs these firms. In competitive markets, if you have to pay a higher interest rate (bordering on loan shark fees) if has an effect on your ability to compete on price. You are at a disadvantage compared to others in the same market, because you are unable to borrow, or it is too expensive to borrow.

    The issues with the companies listed above are:

    1. Are their books cooked.
    2. If we have an economic slowdown, can they still turn a profit if the demand for power decreases.
    3. Will the fiasco in California eventually lead to regulation issues that effect their profits.
    4. Are they in a death debt spiral, even if they are clean.

    My opinion, is to buy them all if you want to invest. For instance, instead of just buying 1 or 2 stocks, invest in all of them to spread the risk.

    Whatever dividends they are currently paying are likely to be cut or diminished soon. Given that they are trading under $5.00 in many cases, that will keep the funds away.

    I want to invest in the utilities, but my feeling is caution in this sector.

    Good Luck!
  4. LouieR


    I understand that they were denied refinancing of an unsecured revolving line of credit today. That being the case, it will probably be more difficult for them to maintain ongoing operations. This is not to say that WMB will just fold, just that their ability to maintain physical plant, etc on a timely basis will be impaired. Also, I do not know what other lines of credit remain available to WMB.
  5. As per insider action, both dyn and wmg have had some small insider buying in the last 6 mos. It's not enough to make it a clear buy signal like some other stocks that I watch, but it's not really significant selling.
  6. vinigar


    WMB sounds ok....last year because of the unusual warm winter natural gas was not in much demand. As a matter of fact the year prior, they had somewhat of a shortage and everyone was crying foul...thanks to ENRON. Then the slingshot effect took place and supply caught up....but then the winter was really mild....seems like to me the last time we had this La Nina thing a few years back the same thing happened...then the following year we had a bad winter and prices for the natural gas and their stocks soared. My guess is that the same thing will happen all over again...keep your eye on the insider buying like Praetorian said and also keep a watch on the supply that they have....once the price of natural gas starts to go back up they will suddenly have all the money they will need. I used to live up north and we used to use fuel oil to heat the house....during the summer months you could buy it for 80 cents a gallon....later on during the winter to buy the same gallon would cost you a $1.30...same was true with natural gas. The other thing to consider is if they a ripe for someone to buy or take them over.:)
  7. P2,

    I did an analysis of insider selling on the utility stocks some time back, and that is the reason I have stayed away. On the whole it was not positive.

    I spoke with a client of mine today, he is an former owner of a gas an oil company, and he sold out about 10 years ago. He got 7 for the company, it went to 2. I asked him what happened next, and he said it went to 40.

    Any one of these companies might not make it, but if I were to bet, I would buy a handful, not just one.

    Good Luck!
  8. the bottom line is risk vs. reward. Personally I wouldn't bite on utilities right now unless I really KNEW that their accounting was clean, their dividend was safe, and the yield was beating the 5 yr. treasury.

    The problem with all this fundamental stuff is that you could have made the same bullish conclusion about WCOM the day before it blew up, but the technicals said get out long before that. I don't know of a single utility that has a nice daily chart right now. At best it sounds like dead money.
  9. bad news follows bad news. if you buy it, be sure it's throw away money.

    I've reasoned that 'it's SOOO cheap' before. And watched 'em go to Z-E-R-O.
  10. I see WMB trading @ 0.90 as I write this, so I guess value is a relative term these days.

    As all this madness calms down in the coming weeks or months there will be jewels out there (MSFT, GE, CSCO etc.) for people with money and patience.

    #10     Jul 24, 2002