Today looks like a good day.... and yet - when I look at what I own and what's "working" and what's not (lazy employees) I noticed that an energy play I have is the laziest. Enbridge Energy Partners (EEP) is down a $1.24 (4%) on a big up day....
That is the Investing 102 cue....
WHY? When everything is green is this one so red? Ya got to just poke around and see what's up.
Seems they offered up a "secondary". That's when a company issues (offers) MORE shares to the market. Usually these are priced at a discount to the current trading quote - so that big money buyers will soak them up and if the offering is below market -- the minute it gets back to "even" - they've got upside potential. They offered 14 million shares at a 3.6% discount to the market --- THUS --- the "price" for the common is now taken lower on the street since the company just valued (offered) to sell shares at a lower price. Makes sense I hope...
So.... is the company going south? No. Is the business bad? No Is there a fundamental change in the business? No Well then what changed? What changed is that they "went to the market to raise some more cash"... i.e., the "secondary offering" ---- they are sellers --- and they get the cash. Usually this is done when companies are making acquisitions... etc. Because if they just needed money to operate --- nobody would buy the stuff! It's kinda like needing a loan --- if you go to the bank because you desperately need money - they won't give it to you! But if you don't really need it - you can borrow all day long!
So with these facts in hand --- in other words --- I went out to find out why this is selling off 4% and found out --- and when I saw what I needed to know I doubled down.... WHY? Because a company I like that pays a pretty good dividend just went ON SALE.... and now all it needs to do is come back to where it was and I have a 4% gain on the new shares. OBVIOUSLY that's IF it comes back. But this isn't FACEBOOK (FB)...
Again -- this is not a recommendation to buy or sell this company. I'm just using it as an example to show the way I (BIG I) think and use the market.
