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Favorite Stock: Cedar Fair
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June 14, 2001: 12:35 p.m. ET
Amusement park operator offers rides for the kids and dividends for adults
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NEW YORK (CNNfn) - As the operator of six amusement parks, Cedar Fair LP knows a thing or two about roller coasters. But its shares, unlike the gyrating stock market, have only gone higher this year for a gain of about 25 percent.
Lenny Weiss, founder of Weiss Wealth Management LLC, began buying Cedar Fair in January and February as a way to diversify his clients' holdings beyond growth and value investing strategies.
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The Steel Force roller coaster at Cedar Fair LP's Dorney Park in Allentown, Pa. | |
Organized as Master Limited Partnership, Cedar Fair has to direct most of its profit into dividends in exchange for paying no corporate income taxes. Last year marked the company's third straight year of profit growth.
Weiss took time this week to chat about Cedar Fair (FUN: up $0.14 to $22.95, Research, Estimates) , which has a ticker symbol true to its amusement park business.
What draws you to this stock?
As an asset manager, my job is to find investments that fluctuate for different reasons. It's not a growth stock and it's not a value stock; it's an income stock with a growth story. Returns this year are harder to come by, so high dividend yields are crucial at this time.
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Lenny Weiss | |
How does the slowing economy affect this seasonal business?
When the economy slows down, people take less elaborate and less expensive vacations. This should allow Cedar Point (Cedar Fair's flagship, Ohio-based amusement park) to have one of its better years. Located in Sandusky, Ohio, on the banks of Lake Erie, Cedar Point is a short drive for approximately 25 million Midwesterners. People are going to go to amusement parks in good and bad times; they go more in bad times.
What's the dividend yield?
It's 6.93 percent. If nothing else, you're exceeding the rate on CDs. It provides an income stream that is suitable for retirees.
Cedar Fair earlier this month said bad weather hurt attendance at its parks through the first five months of the year. Any concerns about the weather issue?
Sure enough, the stock pulled back then, but the weather has broken and attendance is rising.
The company's been acquisitive and now runs six amusement parks, including properties in California, Minnesota and Pennsylvania. What's the significance of that?
Growth. You must take some of this money and invest in other properties. This strategy helps assure future profit growth, therefore, future dividend growth.
Who are Cedar Fair's competitors?
Anheuser-Busch (BUD: Research, Estimates) owns Kings Island (near Cincinnati), but I don't know of any other stand-alone (amusement park) companies organized under the MLP statute.
The S&P 500, after falling 10.1 percent last year, is down another 6 percent this year. Cedar Fair shares have held up amid a falling stock market. What should investors take from that?
Even in bad times, there are some investments that appreciate. The last few years has seen investors trying to play the game like (baseball sluggers) Mark McGwire or Reggie Jackson, swinging for the fences, trying to hit home runs. Cedar Fair MLP is much more like (high-average hitters) Wade Boggs and Rod Carew. With a near 7 percent dividend, and just 10 percent price appreciation, investors can hit singles and doubles. Don't forget, home-run hitters strike out more than they connect.
Do investors need to know anything else about how Cedar Fair is organized?
Cedar Fair MLP is just one of many Master Limited Partnerships. Other such opportunities include businesses in oil and gas transmission, lumber, golf course management, and all real estate investment trusts. Investors should always diversify, even in this income-oriented area. 
* Disclaimer
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