Poseidon Concepts (PSN.TO) Buy, Sell or Hold

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Poseidon Concepts (PSN.TO)

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SELL

(Mark Call Minute.) Unsustainable margins.

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COMMENT

The competitive arena is often considered as a worry. This company should be all right. When you start getting warnings that competition is out there, then start ducking.

WEAK BUY

They create tanks to hold frac fluids. Have very high margins and it doesn't cost a lot to manufacture the tanks. The issue here is that it is not a defensible business. Expects that margins will come down as competition increases. Over time, the 8.3% dividend will have to be readjusted. Be cautious.

DON'T BUY

The chart would indicate that the story has been over for a little bit. It had a break around $15 and the next area of support would be around $12, which is where it looks like it wants to go. There are better opportunities elsewhere.

HOLD

One of the flavours du jour. In the service sector with tanks in the oil field space. Juicy yield of roughly 10%. Margins are extremely high. Not all that different from what other people can do so eventually the margins will come down. Not that special in what is providing as a service offering.

DON'T BUY

Her concern is the high level of margins and in a very competitive business the product is not particularly proprietary. Expects to see a lot of new competition coming in, which will put some downward pressure on margins. Trading at around 7X compared to peers at around 3 or 4. 8% yield.

DON'T BUY

Did a marvelous job of creating a new business out of ponds to contain fracking fluids. There will be more competition coming in and what it will do to their margins, so it will have to come down at some point.

TOP PICK

Dividend almost 8%, monthly dividend. Growth very, very rapidly. A lot of fluid being held in lined pits. They have a better way of doing it. Lots of hedge funds are short this stock and are spreading rumors. The tank failure today did not happen.

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BUY

Feels there is a lot more to go. Their market share in North America is small at about 5%-10%. There is competition coming up but there is a lot of room for everybody. He is looking for $18-$20.

BUY

Looking at this one closely because he sees a lot of growth in the tank business. Expect that by the end of 2012 they will have 400 tanks in service and about 75% directed towards oil activity and he can see continued legs in the business. Also have a very large and growing footprint in the US. Over time he can see competition but can still see an expected rate of growth going forward.

COMMENT

Has being a really hot stock since its IPO last year. Has looked at the fundamentals and a company in an industrial business like this one that is generating 85% EBITDA margins, is not a sustainable business model. Have captured an unserved market in a very short period of time but he is sure that at some point there will be competition.

HOLD

(Market Call Minute.) Has only a 6% market share and somebody will come along and take over that space.

COMMENT

Renting tanks that are used for storage of chemicals and fluids. It seems it is better for the producers to use this company. Fabulously large market. Pays a huge dividend. There are doubters who say other companies will simply copy their product. It should continue its success for the time being and will probably double their revenues and production.

DON'T BUY

Valuation is getting a little rich. Take up on their tanks has been unbelievable. He thinks they only have a 5% market share at this point. Companies are on 3 year contracts to buy the tanks. Dividend safe for at least a year. Would prefer fracturing company.

BUY ON WEAKNESS

Margins in the 85% range and paying a dividend. Going forward more competition will enter the space. Margins will eventually come down due to competition. Likes it here and is buying it on dips.

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