Roller Coasting to Profits

06/06/2003 12:00 am EST

Focus:

Nancy Zambell

Editor, Wall Street's Best Investments and Wall Street's Best Dividend Stocks

Nancy Zambell, editor of UnTapped Opportunities, first recommended Cedar Fair in 1995, and she still remains a fan. Indeed, not only is she a big fan of the stock, she is also a huge fan of the company’s rides, as she calls herself a roller coaster nut. Cedar Fair was voted the best amusement park in the world for a record five consecutive years by Amusement Today.

"Cedar Fair (FUN NYSE) is one of the oldest amusement parks in the world; it was originally built as a recreational area in 1870. Cedar Park has more rides and more roller coasters than any other park. Its Millennium coaster is 310 feet tall and it's rated the world’s #1 roller coaster. Among its other 15 coasters are some of the world’s fastest, tallest, and steepest. Its newest ride–Top Thrill Dragster–is the tallest and fastest coaster in the world. The ride accelerates to 120 miles per hour in 4 seconds, climbs 420 feet at a 90-degree angle, and then drops 400 feet, freefalling at 120 mph.

"The company also owns five other amusement parks: Knott’s Berry Farm, Dorney Park and Wildwater Kingdom, Valleyfair, Worlds of Fun and Oceans of Fun, and Michigan’s Adventure. Cedar Fair is a master limited partnership. As such, the company does not pay federal income tax like a normal corporation. The result is that Cedar Fair pays out the biggest share of its earnings to its unitholders. For the investor, that is just great. Currently the investors’ share of that income provides a yield of 6.7%. And in March, Cedar Fair increased its quarterly cash distribution by 5%.

"Trading at just ¾ of its competition's price-to-earnings ratios, now is the time to buy this stock. The company has shown more than 100 years of successful operations. Its continuous focus on updating and adding new attractions bolsters growing attendance. The stock is undervalued. And I anticipate further growth, to the tune of another 35%, not including the healthy dividend. Meanwhile, the stock is undiscovered. Only 19% of the shares are held by institutions, with just a few analysts even covering the company. Buy up to $28 with a mental stop at $20."

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