In past posts, the need for a diversified portfolio has been discussed. The same need for diversification of a company’s product base was not. Common business wisdom preaches focusing on what a company does well and do more of it. Although this may be one way of approaching the business model, it is not the only way.
In some instances, a balancing of assets can be another way of approaching the issue. This is especially true where a commodity is concerned. Because a commodity product can find very quick price rises and falls, having a stable and consistent source of revenue is wise. This diversification can come in some interesting forms depending upon the creativity of management. It does, however, provide for a more stable income flow where uncertainty is the investors enemy.
New Concept Energy Inc., an oil and gas exploration company, along with other assets, works to discover and exploit oil and gas reserves primarily in the United States. Its current proven reserves of natural gas are 6 million cubic feet located in over 1,700 acres within Arkansas.
Although the commodity price of natural gas has been at lower levels of late, the company has been able to post a net income of $49,000.00 for the third quarter. Assessing this result, however, is not quite as simple as one might suspect. Natural gas exploration and development has become the focus of the company but not the entire focus. Diversification is the real issue as one considers New Concept Energy, and in ways that may appear odd but profitable.
The company, one will find, owns and operates a senior assisted living facility in Oregon, licensed for 114 residents. Strange but true. The consideration in this respect is that each of these two sectors are or will be profit centers going forward with the assisted living facility now contributing as natural gas development takes place. As the US population ages, the assisted living enterprise will only increase its revenue while natural gas will eventually become the oil of today. Time is the only element in each of these equations. Buying and holding is the key for this company. In a general sense, New Concept has and continues to put strategic assets together for a diversified company working in somewhat varied environments. Each, however, appears to be very lucrative as the economy, the population and need for efficient energy advance in a time of change.
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