Tuesday, March 3, 2009

Harvest Energy Cust Distributions 87%

Harvest Energy, that I own in my RRSP, announced their 2008 results, as well as a 87% reduction of the distributions to $0.05 per month.

So I was too optimistic yesterday when I purchased more units of the trust. I was estimating that the cut would be to $0.10 per month. Now, based on my purchase price of $5.83 yesterday, those units are yielding 10%. The units have falling quite a bit this morning, hitting a low of $4.50 (which yields 13%).

I figure that as long as the price of oil remains in the $35-45 a barrel, the trust units will trade in a $4-$5 range. The question is, how long will the barrel of oil stay that low? I still believe that over the long term, this is a good investment. It still hurts, though!

Well, I already knew that I'm not good at timing the market...


Anonymous said...

I saw a recent study that showed that Trusts that cut their distribution are down about 20% (on average) in the two days following the cut.

Obviously in some cases, the market had fully expected the cut and the unit price did not really move. On the other hand, on average, it is not a good idea to buy something if you think a distribution cut is coming.

Frog of Finance said...

Do you have a link for that study? The source and methodology of the study has a big effect on its credibility. And I'd like to read it.