Rising Present Value Ratifies Burlington Resources' Acquisition Timing

Rising futures prices contribute to gains in the value of future cash flow from natural gas production.  Declining interest rates also make a dollar to be received in the future more valuable in discounted form today.  Both factors contribute to a higher present value of natural gas resources.  Thus the acquisition by Burlington Resources of Canadian Hunter, announced a month ago, appears well timed.  Yet the stock price for Strong Buy Burlington Resources remains depressed, near the same as a month ago and down some 27% year to date.

We wrestle with ourselves as to whether we should keep recommending a stock that doesn't perform as it well as it ought.  The problem with the stock is management's record as we have amply chronicled, diplomatically, we hope.  A new leader who could gain the confidence of investors would make a huge difference.  The first place to look for new leadership is from the Board of Directors.  Failing that, the company seems ripe for an active investor who would recommend replacing management.  Finally, the company has to be a prime target for acquisition.  There is a unique opportunity for a well-capitalized buyer to make a timely bet on an undervalued resource, in our opinion.