For 25 years, Steven Halpern, editor of TheStockAdvisors.com, has surveyed the leading financial newsletter advisors asking for their favorite stocks for the coming year. This article is one of 100+ ideas in the Best Stocks for 2008 report.
"My favorite conservative recommendation for 2008 is Duke Energy (NYSE: DUK)," says Roger Conrad, editor of The Utility Forecaster.
"Like most electric utilities, Duke Energy faces a capital spending challenge in coming years, as it ramps up output to meet exploding future demand and meets new regulations on carbon dioxide. Unlike most, however, it's well positioned not only to meet the new rules but to profit from them.
"Duke's nuclear power plants have long been among the best-run in the industry. To them, the company has added a wind developer this year as well. But the real opportunity could well be in coal. In November, Duke won Indiana regulators' approval to build a 630 megawatt integrated gasification combined cycle plant (IGCC).
"By converting that state's coal to clean-burning gas, the plant will produce four times the electricity of the Edwardsville coal plant it will replace and 45% less carbon dioxide (CO2) per megawatt hour. That's not including the potential addition of CO2 capture technology.
"Importantly, regulators have signed off on rate recovery for the plant's $2 billion price tag, of which $460 million will be offset by state, local and federal tax credits. It's now slated for startup in 2012.
"The real key to meeting Duke's capital challenge is regulation. Happily, the utility is blessed with favorable relations in all of its jurisdictions. The result is a future of solid earnings and dividend growth over the next several years. With a well protected yield of well over 4% and selling at low multiples to book value and sales, Duke is a strong buy up to $22 for investors of all stripes."
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