I recommend closing two of our positions today -- one to cut our losses and the other to book a big profit.
Let's sell Canetic Resources at market. Oil and gas have rallied smartly in the past two weeks, but unlike nearly every other Canadian Energy Trust that participated in that rally, shares of CNE are getting hit hard today, again, on heavy volume.
The stock just went ex-dividend on Jan. 29, so we do collect another 17 cents a share, but I truly can't justify taking any further risk with this stock. CNE should have found new life by now with the energy rally, but instead it is testing its lows. We said we would wait to see whether the CanRoys would pop with a spike in oil and gas prices, and most did, but this stock is a real laggard and is weighing us down.
Unfortunately we are taking a 30% hit, and that's including the dividend payout, but it just makes better sense to sell Canetic Resources and move on.
Let's close out Mesabi Trust at market based on the fact that we can book a 65% gain, including dividends.
With the cut its most recent dividend distribution, the current yield is now only 4.83%, or roughly one-half of the yield we want a typical position to generate. In addition, the trustee isn't giving us an indication of how the dividend will be treated from this point on. I do feel that we are operating in the dark with this name and it doesn't make sense to continue holding Mesabi at this time.
I recommended taking the position in the stock on Jan. 3, 2006, so if you bought it at that time your profit qualifies as a long-term capital gain. Sell at market.
I'll have more information on these recommendations later today in the Weekly Update.
Bryan Perry
Editor The 25% Cash Machine