Has Fool's Munarriz lost it, re: Cedar Fair?

Check this one out...

http://www.fool.com/investing/dividends-income/2007/05/03/cedar-fairs-wrath-of-con.aspx

Generally speaking, I've agreed with pretty much whatever Munarriz talks about in his column regarding the public amusement companies. But what is he smoking this time? He says the Paramount Parks had a "rocky start" last year (according to whom?) and that the company might have taken on more than it could stand, citing Geauga Lake's below average performance. Huh? The Paramount Parks were doing well when they were purchased. Why would that change?

He even admits that Wall Street is generally upbeat on the company. I don't get it.

I didnt either but if the properties aren't run right there is a chance that things could go sour or even if there truly is an issue with weather or another terrorist attack or even a recession...There are so many things that could cause this or any other company to not do as well as predicted.

I do this time disagree but with any luck his sentiments might drive the price of the stock back down a little and I can buy some at a fire sale price. While I dont wish that on Cedar Fair. I do think that they learned by growing slowly and in this case when they did bite on a big purchase they did their homework. The Paramount Parks will be a big boon to their economy and how much money the company makes. This year will be a true transition year from Paramount ways to the Cedar Fair ways. I suspect that will only be a bit of tightening of the belt on the Paramount Parks. I can honestly see this as going one way....UP!

Like I said, the Paramount Parks were not a fixer-upper. The guy is losing it. :)

He's comparing Paramount Parks to Geauga Lake? What the hell...

After talking to my uncle who holds some CF stock, he explained to me that he's on hold for their stock because of the debt load they've taken on. So he's neither buying or selling for now. Even though they are taking on some pretty nice parks, they are mainly looking at that burden of debt and how quickly they can pay it off.

Seeing that the first quarter didn't look so good on paper (duh! It's the freaking off season for about %85 of their properties!), I can see where Munarriz could be getting the ideas of doom and gloom. However, once the season kicks into full gear I'm pretty sure that we are going to see the complete opposite of attutide towards CF. I'm thinking they are a little jaded about what SF did late 90's / early ought's.

~Rob Willi

I did not read this article as all that negative...I just saw it as a neutral piece that really did not need to be written. He is off on the Paramount comparison for sure...they are not Six Flags Ohio.

They get good weather and gas does not go to $5 per gallon and the debt load seems more than manageable IMHO. The RISK is in the forces they cannot control.

...I still say that there is no compelling reason to buy since the ROI can be found all over the market...but that horse is dead.

...This article...to me...sounds like a guy who could not wait to tell us about all the coasters he has been on. The rest was afterthought.

It's funny how people get all worked up when the slightest bit of criticism is directed at Cedar Fair. Sometimes I wonder if the stockholders of that company should form their own religion ;)

Cedar Fair absorbed a company that was roughly the same size while struggling to find a solution to a major problem with one of its recent acquisitions. Why is the author suddenly a bad guy that's out of touch with reality? If anything, I think he brought light to something that a lot of analysts have been ignoring. Perhaps the Paramount Parks weren't exactly fixer-uppers but they're still likely to strain the limited resources that Cedar Fair has... either that, or pose a problem when it comes to integration.

---

-"Can the new Maverick coaster at Cedar Point pack a wallop despite its small footprint?"

---

Small footprint? Does he not realize that the ride is over 4450 feet long or, ahem... the 4th longest coaster in the park? My god, the ride sites on 5 and a half acres! That's like, 5 football fields!

I guess that's not enough for him, but for me...that's huge! :)

Besides, as much as we hate to admit it, buying the Paramount parks has given them something to do with Geauga Lake... a place to slowly move rides away from, and then sell the property on the other side of the lake to developers. Keep the waterpark, move a few rides to where the old waterpark was, and wrap the park around that side. That way they can keep the old midway. Then sell off the "newer" areas of the Geauga Lake side, plus the parking lot, to a big box developer (who generally won't complain about noise).

As painful as it is, I think this is what will happen eventually.

I don't think so. If 700,000 visitors is what the park will average, then I suspect they'll make it work against that number. They're the only water park game in town. Hopefully they'll bank on that.

---

Rob Ascough said:
It's funny how people get all worked up when the slightest bit of criticism is directed at Cedar Fair.

---

It's funny how people get all worked up when the slightest bit of criticism is directed at Conneaut Lake. Sorry, softballs are too hard not to hit.

Munarriz is a smart guy, which is why I don't get his criticism. I mean, there isn't anything new today that we didn't know last summer when he was more upbeat on FUN. I take that back, they did beat analysts expectations on the first quarter loss, which to me is a remarkable achievement when you can't do much to actively boost revenue.

The quarter I look forward to seeing the most is 4Q07, with all of those parks doing their thing late into October. Remember that they just posted their first profitable 4Q just a few years ago. Imagine how it'll go with more parks open!

---

Isca said:
Keep the waterpark, move a few rides to where the old waterpark was, and wrap the park around that side. That way they can keep the old midway

---

I'm pretty sure that won't work. The end of the lake between the old midway and the former Sea World property is owned by a homeowners association or something and is used by the people in the houses across the street.

^^ Believe it or not, that was a general statement and not directed at you. But since you picked up on it, that speaks volumes. At least you're good at hitting softballs, keeping in mind there is a difference between softballs and hardballs.

Getting back to the topic at hand, is it possible that the guy just had a change of heart? Did something get acknowledged recently- perhaps the rise in gas prices- that is leading market analysts to believe attendance is going to dip this year? Or is it possible that Cedar Fair was expected to do more in the way of cap ex when it came to the Paramount Parks? Basically what I'm getting at is there might be something that caused Munarriz to go back on what he said a while back... perhaps something he's chosing not to bring into the conversation?

I interpretted that the article emphasized that this could be an interesting year, so it may be safer to take a wait and see attitude when it comes to Cedar Fair stock. I think this acquisition was much larger than anything they have had to digest in the past, and it may cause some temporary discomfort.

One of the big differences between the Paramount parks and some of their older purchases, is that the Paramount parks are not fixer-uppers, so how much additional growth can Cedar Fair get out of those on a park by park basis? They have failed to grow attendance at GL, so can they really expect to get a lot more peeps through the gates at the Paramount parks?

Remember, investors, unlike us enthusiasts, are looking for growth, not maintaining the norm. You can be a 10B dollar company, but if you fail to grow it to 10.5B or 11B, watch the stock drop like a rock. Maintaining the status quo doesn't cut it in the market, it is all about growth.

In the long run, I think Cedar Fair will do just fine with this, due to their frugal nature and sound business sense. But if you are looking for a quick return on this acquisition, you may be disappointed.

I think he is just a bit disappointed in Maverick as the choice for CP's next coaster and that is tainting his opinion a bit. It is certainly understandable. ;)

It's not as much about growing the Paramount Parks as it is growing Cedar Fair as a whole, which they've obviously done.

^ They could have got a Floorless, Verical Drop, or a flying coaster, and they got something new and different and that's the best choose for them.

Lurker said:

Remember, investors, unlike us enthusiasts, are looking for growth, not maintaining the norm. You can be a 10B dollar company, but if you fail to grow it to 10.5B or 11B, watch the stock drop like a rock. Maintaining the status quo doesn't cut it in the market, it is all about growth.

Not completely true. As has been stated here before, it would be a mistake to consider CedarFair a growth stock. Given it's consistent dividend yield, it really is much more of a "value" rather than "growth" stock. I personally would think of it more in terms of an "equity income" investment, which certainly has a role in a portfolio. Investors shouldn't look to FUN for exponential growth each year. It's not that type of stock or business model.

Is FUN rated a top 10...top 100 dividend stock by anybody/anywhere? I honestly do not know...and am asking for information rather than flame those who seem to love it (FUN) so much.

A consistent dividend is nice...but there are ETFs and value funds that will mirror top income investment portfolios w/o the risk associated with owning one stock. While FUN's past history of consistent pay-outs is impressive from a reliability stand-point...who knows how the Paramount acquisition will truly turn out? The dividend could disappear over night. I'm not saying it will...I'm just saying that the risk seems unnecessary when there seem to be much safer (more diversified) means of obtaining income growth.

Now if you guys are suggesting that FUN's yield is out-performing other income stocks and funds...then I could see why the risk would be worth it. Even the most zealous of FUN supporters keeps repeating that this is not a growth stock...therefore I can only assume the bullish attitude is either the result of a higher than typical yield OR an emotional attachment to FUN not based on market realities. I admit that I suspect the later based upon the "hold" and "sell" recommendations I see from my stock research software...but am willing to look at evidence from any unbiased (i.e. non-coaster fan-site referenced) recommendations that would show FUN as a serious "buy" stock.

I'm leaning in the direction of thinking Rob might be onto something with the "religion" comments. However, I'm always looking to educate myself with OBJECTIVE information. Do any of you have any objective data to point me toward? Or do yo only have your OWN interpretations of the data? While I certainly appreciate this site/discussions/news/etc...I find it would be rather unwise to make stock buys based upon message board commentary.

Obviously anyone who would make investment decisions based on recommendations from a coaster web site would be beyond a Motley Fool - they'd be a total idiot. Personally, I don't own a single share of FUN individually and probably never will. Although I have alot of money in retirement accounts invested in mutual funds and thus likely own shares indirectly. I only buy through mutual funds using a dollar-cost averaging approach. The only reason to own shares of FUN would be to add a little "fun" to your investments as a very minor component.

I own FUN as a small part of the overall portfolio. I have some stuff that does great over time, some that doesn't. Heck, the funds in my IRA are all over the place. FUN is a predictable and steady component overall. You don't put all your eggs in one basket, obviously. Spread the money around, and chances are you come out well ahead overall.

For me at least, there is a slight emotional component in that I understand the business, I know the people who run it, and I'm confident that in the long run it will continue to be successful (which Smith defines as "average," but whatever). I took a bath on some individual stocks in 2000 that analysts and Wall Street just loved, not knowing enough about those businesses. Now that I know better, the only way I'm comfortable on individual companies is if I feel like I know what's going on in them. And who has the time for that?