Enerplus Resources Fund (ERF)

[winston]

THE TREND IN CANADIAN ROYALTY TRUSTS IS STILL DOWN by Brian Hunt

A subscriber writes in to ask: Is it time to step in and buy oil royalty trusts?

"Only if you like stepping in front of trains" is our reply. For reference, we present the past two years in the Enerplus Resources Fund (ERF).

With a market cap in the billions, Enerplus Resources is one of the big "bell cows" of the Canadian energy trust sector. For most of the past decade, owning ERF was like owning a busted slot machine: The fund passed along huge monthly dividends and enjoyed a rising share price during the 2002-08 bull market in oil.

The past six months tell a different story. Shares are have lost about 70% of their value, and ERF's distribution has been slashed by falling oil prices. Shares hit a new low yesterday... and our chart below displays a classic "falling knife" asset. Royalty trusts like Enerplus will be a solid buy if oil rebounds back into the $50 area. But right now, shares are in a dangerous freefall... and now is not the time to catch this falling knife.