Yesterday, I added 500 shares of Perpetual Energy at $4.63 to my HELOC account.
I currently hold 1000 shares of PMT in my HELOC account at an average price of $4.725.
Stock Trade Commentary
In my opinion Perpetual Energy is extremely undervalued and a dividend cut is already priced in due to natural gas prices wiping the floor. This is not a dividend play, as I have said before, this is a play on all the game changers the company has in the pipe. If the dividend does get cut, it will free a significant amount of capital to accelerate investment in their game changers from Cardium Oil to Heavy oil and bitumen in NE Alberta amongst others.
The company is not going belly up anytime soon as natural gas is not being distributed for free yet and the recent weakness in price is an opportunity in my opinion to get in for a long term hold which is why it is being held in my HELOC. I have enough dividends coming in to cover my HELOC monthly interest so any cut in their dividends will not affect my plan. I am not expecting the share price to tumble once the dividend is cut as I consider it factored in right now, but if it does, I will add another block in my HELOC as the price will recover and move higher subsequently after income oriented investors who were left sell out and move on.
PMT gives a superb exposure to any upside in the price of natural gas and an excellent leverage to their upcoming plays. What is the best time to start a position if not at the point of maximum pessimism for natural gas. As the cold sets in natural gas usage will pick up, this would reflect in dropping weekly injection numbers. Of course, the risk of running into a mild winter will ruin any chance of this happening.
PMTs Wilrich and Cardium drilling results will be the variables that will define my next course of action with PMT.