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January 4, 2006 Stock Pick: Cedar Fair, L.P. (FUN)

Stock Price: $28.09

Cedar Fair, L.P. owns and operates seven amusement parks in the United States. Cedar Fair, L.P. owns and operates seven amusement parks in the United States. The most famous of these parks is Cedar Point on Lake Erie in Sandusky Ohio. Other parks include Knott's Berry Farm, Dorney Park, Geauga Lake, Valleyfair, Worlds of Fun, and Michigan's Adventure.

Cedar Fair owns inarguably the best amusement park in the world, Cedar Point was the first amusement park to build roller coasters over 300 and 400 feet tall. Their newest roller coaster, Top Thrill Dragster reaches 420 feet and accelerates to a speed of 120 miles per hour. Year in and Year out this park does not cease to surprise with its new thrill rides and roller coasters. Geauga Lake and its other parks are beginning to grow and could someday become as great as Cedar Point.

The company had revenue of $317.0 million for the third quarter ended September 25, a 4% increase over the same period last year. Net income for the quarter was $170.8 million, $3.11 per diluted LP unit. This is compared to net income of $91.7 million, $1.70 per unit a year ago. Right now, FUN is trading at a P/E of only 10.33. There are 53.77 million shares outstanding and under 1% are being shorted.

What makes this a strong investment vehicle other than the possible capital gains is that FUN is currently yielding 6.5% and this has been increasing each year. FUN is at a great entry point with little downside risk from here.

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