Power up on power generation stocks

Power generation stocks, such as Dynegy Inc (NYSE: DYN) and AES Corporation (NYSE: AES), have gotten beaten up pretty good the past few weeks. We blogged recently about the merits of jumping into AES. But Dynegy is another company that investors should look into after the recent market weakness.

As we blogged yesterday, investors should look at sectors that got hit hard in the tech-telecom bubble, as scars in these sectors run deep and investors are quick to run for the hills even though industry fundamentals are much improved. The same can be said for the power generation business.

The power generation business, particularly the merchant power producers, went through a similar type of bust cycle as the telecom sector, with many companies entering bankruptcy. However, Dynegy, which was a must-own stock along with Enron in the late 1990s, was able to avoid bankruptcy, bring in new management, dispose of its money losing tolling arrangement and recently made a large acquisition of a privately held power generator which will help it to grow.

Management in Dynegy is top notch, having come from Duke Power, and has executed magnificently to turn this company around and turn it into an important player in the power generation business. This is one stock your want to consider for your buy list on this market correction.