tag:blogger.com,1999:blog-5433839636644874439.post8757928077058482613..comments2024-03-04T13:37:11.022+00:00Comments on Canadian Financial DIY: Waterfurnace Renewable Energy Q3 Report Good and BadCanadianInvestorhttp://www.blogger.com/profile/05645767559302303541noreply@blogger.comBlogger4125tag:blogger.com,1999:blog-5433839636644874439.post-90947793187509984782010-12-02T22:33:30.356+00:002010-12-02T22:33:30.356+00:00Anon, thanks for the very useful comments, both on...Anon, thanks for the very useful comments, both on WFI and the other two companies. Looks like they might be worth a gander indeed.<br /><br />On the possible collapse of oil and gas prices, that might happen short term for a few years but the history of the last 25 years or so is of significant (far ahead of CPI) real long term price increases. So WFI's absence of debt gives it the wherewithal to survive, as the current housing collapse is showing.<br /><br />The warranty danger sounds more likely, along with other possible management messing up and self-inflicted damage.<br /><br />Your point about expanding slowly echoes the comments I saw on a couple of chat forums of people who did an installation and had problems. The big risk is incompetent contractors / installers, not the equipment. As one person colourfully put it, you do not want the guy with the baseball cap and his bum crack showing.CanadianInvestorhttps://www.blogger.com/profile/05645767559302303541noreply@blogger.comtag:blogger.com,1999:blog-5433839636644874439.post-85678077108543017882010-12-02T16:09:04.053+00:002010-12-02T16:09:04.053+00:00My worries:
1) Products warranty: the Waterfurnac...My worries:<br /><br />1) Products warranty: the Waterfurnace Envision system sets the standard in the industry. I personnaly own one. It comes with a five-years worry-free warrantee. From what I know, this product seems so far highly reliable. I think 15 years ago, Waterfurnace nearly destroys its brand with products of questionnable reliability. Ex-CEO Bruce Ritchey did a fantastic job turning around this company. So much that Waterfurnace products are now seen as the best products in the geoexchange market. Nevertheless, potential sizeable warranty claims always make me nervous with any company. <br /><br />2) Natural gas and oil prices: I am somewhat a believer in the peak oil theory that high oil prices are here to stay. I am more nervous with natural gas prices. A total collapse of fossil energy prices -something I do not foresee but there is still a risk however depending on the health of the world economy- could prove disastrous for the company. <br /><br />BTW- I very much like the dividend. The geothermal market is a slow moving market with lots of stakeholders (borehole drillers, installer-designer-dealer, HVAC contractors, unit manufacturer, etc). All these guys must move in lock step with Waterfurance expansion. If Waterfurnace is super agressive in its expansion strategy, this may force it to start dealing with inexperience geothermal installers/designers or borehole drilers. Even if your product is of highest quality, an inexperience or unqualified installer could make a lot of damage on your product reputation. In the ground source heat pump business, incremental steps type of expansion is beautifull. An all out push to maximise your profits in the short term would likely be a disaster in the long term. So I very much like Waterfurnace slow expansion and dividend policy.<br /><br />I would strongly encourage you to do an analysis of Computer Modelling Group and 5n Plus. These two companies share many features with Waterfurnace as an investment:<br />1) exposure to energy prices<br />2) small company with a very sizeable market share in their respective market <br />3) no debt and great free cash flow<br />4)insiders own a big chunk of the outstanding shares (at least 20%)<br />5) few analysts following these companies<br /><br />Thanks,Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5433839636644874439.post-54280453725603962442010-12-02T14:05:28.734+00:002010-12-02T14:05:28.734+00:00Anon,
It's nice to have my "confirmation ...Anon,<br />It's nice to have my "confirmation bias" itch scratched. To help us both I'd be interested to hear what worries you most about WFI - what could go wrong?<br />No, I had not done any analysis of Computer Modelling Group nor 5n Plus.CanadianInvestorhttps://www.blogger.com/profile/05645767559302303541noreply@blogger.comtag:blogger.com,1999:blog-5433839636644874439.post-82971139531112119422010-12-02T13:38:21.146+00:002010-12-02T13:38:21.146+00:00I have been a shareholder of Waterfurnace since ea...I have been a shareholder of Waterfurnace since early 2007. My average purchase price is around $24. Counting the dividends, I have beaten the market by a very wide margin thanks to this investment. (note: I have a tendancy to put all my eggs in the same basket and watch closely the basket! Waterfurnace still represents more than 50% of my portfolio.)<br /><br />I agree the next two years might be somewhat disapointing mostly as a result of the still very much depressed US housing market. At the same time, it is important to note that Waterfurnace management has accomplished miracles in the last two years by being able to switch swiftly to the replacement market as result of the collapse of the new construction market. I will buy more shares if price decrease to 20$. I am definitely a buy-and-hold on this one. New and improved products appear to be on the horizon for 2011-2012.<br /><br />Also, out of curiosity, have you done an analysis of Computer Modelling Group and 5n Plus quoted on the TSX?<br /><br />Thanks,Anonymousnoreply@blogger.com