This pitch from Keith Schaefer started running several months ago, but we’ve had questions pop up every now and then about it… and just recently, he has jumped on November 12 as the key date to urge investors to action (both buying the stock and, naturally, subscribing to his Oil & Gas Investments Bulletin).
So we’re re-releasing this teaser solution piece, and it happens to be a stock I bought some of at the time. The ad spiel is similarly worded to the one we saw back in July, so what follows has not been updated. Since I own the stock personally and I’m also interested to see what they say on November 12 (that is indeed when they release their next earnings), I’ll add some updated thoughts to the end of the article. We’ve also left the original comments from July attached below so you can see if our readers had other useful notes for your consideration.
Keith Schaefer is mostly an oil and gas guy — and his latest ads say that he’s putting 1/5th of his own personal wealth, $400,000, into a single stock.
So, naturally, our readers (including Gumshoe columnist Myron Martin) have been asking me “who is it?” Let’s put the Thinkolator to the test and see if we can name it, shall we?
The promise is pretty compelling — the basic pitch is that this is an energy marketing company that is about to get access to Comcast’s customer list to pitch a “bundle” that includes not only HBO and broadband but also your natural gas or electricity service (possibly including solar). Sounds kinda interesting… and it also pays a high dividend, which means that, like many of Keith’s picks, it’s probably Canadian.
But let’s get some of this in Schaefer’s words…
“Comcast…. may now be my second-favorite company.
“That’s because they’ve just created a new ‘energy loophole’ –
“By partnering with my #1 new company.
“And this loophole is so powerful and compelling — I’ve invested a full 1/5th of my portfolio into the trade.
“That’s more than $400,000 of my Personal Portfolio, in this single play – green-lighted by the biggest cable company in America.
“So, if my investment thesis works — and it’s off to a great start so far — it’s going to benefit both of us in a big way….
“I haven’t even mentioned the big cash payouts I’m getting from the double digit yield.
“It’s just over 10%, and I expect these big payouts to increase—a lot.”
Mouthwatering, right? Well, let’s see if we can sift a few more details from the pitch. Here’s how the deal with Comcast works:
“… the entire strategy involves a highly unusual partnership between two companies at complete opposite ends of the stock spectrum.
“One is very very BIG (that’s Comcast), and the other is tiny… a micro-cap hand-picked by Comcast…..
“[customers] get cable, internet and phone – all in one bill, if they want.
“Now they can get their energy bill, too, from Comcast.
“… it could be a guaranteed lower energy bill… and a free gift, like 3 complimentary months of Showtime, HBO and Starz…
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“Customers can actually see their monthly energy bills shrink, like clockwork….
“While Comcast gets easy incremental revenue, and my #1 energy pick gets a new customer.”
If you’re not in one of the states where utilities are partially deregulated, this may sound a bit odd — but in about half the states you are able to buy your gas or your electricity from a variety of different suppliers who might offer different deals (prepay discounts, lower prices, “smoothed” bills, etc.), so you still end up paying your traditional utility for the delivery service, but the actual energy might be supplied by any of several providers. All of whom, if my experience in Massachusetts is any indication, will advertise as AT&T and Verizon to win new customers.
So it sounds like Schaefer’s talking about one of these companies, an energy retailer that works through a variety of partnerships to get customers, apparently including “bundle” customers with Comcast or other utility or telecom providers. I’ll confess that I’m not much of an expert in how these companies work, I don’t know what typical margins are — though I imagine it depends a lot on their ability to control and hedge for changing prices for wholesale natural gas and electricity.
More from the pitch:
“And here’s the thing about my loophole company…
“They make crazy offers!
“Basically they are saying – We want you to pay less on your monthly energy bills…
“But you must accept these FREE Premium TV Channels, and other perks first.
“These offers give such immediate rewards, it makes customers forget about ‘things that happened at the old Comcast.’….
“If only 3% of Comcast’s customers take them up on this (that’s WAY less than what Management and Comcast both expect)…
“My loophole company – with its Comcast Connection – will more than DOUBLE its customer base.
“And that means a lot more than doubling earnings and cash flow.”
Other clues? Keith says that they blew out estimates in the first quarter this year, and that there has been insider buying.
And it apparently has fewer than 20 million shares outstanding, with “little debt” — a little surprising for a high yielder, since very often companies that pay 10% yields have to use debt leverage to generate that amount of distributable cash.
We’re also told that there are a couple catalysts coming…
“The first catalyst is Texas.
“In regulated states, you buy energy directly from the utility. They – or the government – set the price.
“But in states where energy is de-regulated, consumers have a choice in where they purchase that energy.
“That means energy suppliers can compete with each other in selling directly to customers.
“And in Texas, consumers can now buy from my #1 stock pick.
“They just bought one of the largest energy retailers in the Lone Star State.
“That gives my fast-growing junior company an active presence in 20 states now, plus Washington, DC.”
And the second catalyst?
“It’s where customers can get guaranteed lower energy bills. And it’s insanely profitable.
“It’s another partnership they’ve signed – a major one, just like Comcast.
“This second catalyst has just started raking in the cash for my biggest investment ever.
“It will generate years of super-high margin revenue—and recurring revenue, with basically ZERO risk….
“They’re in partnership with one of the industry leaders in solar energy — providing roof-top solar power systems.
“Not only does their solar deal give them an incredibly high 50% margin business…
“Even better – they get a recurring revenue stream: residual commissions for every customer they sign up—for 15 full years….
“… they’ve only been in the solar market for a little over a year, and already it represents 10% of company cash flow….
“… the deal is such that this energy retailer has ZERO cost exposure to the solar business… so their risk is zero.
“It’s all pure upside: commissions and ongoing royalties.”
OK, so that sounds fairly impressive. Enough detail to name the “secret” stock for you?
Indeed, the Thinkolator is up to the task — this is Crius Energy Trust (KWH-UN in Toronto, CRIUF OTC in the US), which did indeed go public in 2012 as a 28% owner of Crius Energy, which was a relatively small energy marketer under brand names Viridian and Public Power, mostly in the northeastern US.
They’ve expanded their brands since then, adding a couple partnerships with telecom companies (Cincinnati Bell and Fairpoint) and buying a couple companies along the way, including TriEagle a few months ago (that’s the one that got them into Texas, though in a small way so far)… and just a few weeks ago they did a follow-on offering at C$6.80 that helped them in