Readers of this space know that one of the preferred sectors is the electric power generation sector. And the sector is favored for a reason that may not be obvious to all. Electricity via wind, solar, and nuclear generation is likely to play a large role in energy as climate change reduction, then elimination, becomes a societal goal. Electricity also remains a potential propulsion source for cars, particularly once oil resumes its inevitable climb. And with the above in mind, electric power generator Northeast Utilities (NYSE: NU) is worth a review.
In general, analysts see flat revenue for F2009, but the view from here argues that may be tad harsh on NU. Two regulator-approved rate increases have given NU the potential revenue upside investors like, provided typical energy demand growth resumes when the U.S. economy starts to recover.
Further, NU's market profile – its electric unit primarily serves customers (1.9 million in all) in land-of-steady-habits Connecticut, Western Massachusetts, and New Hampshire – is considered to be low-risk, and not as subject to boom / bust subscriber cycles characteristic of utilities in younger markets. The First Call F2009 / F2010 EPS estimates for NU are $1.83 / $2.03.
Add a 91-cent annual dividend and a stock chart that appears to have put in a double bottom near $19, and the scale is tipped in favor of a Buy.
Stock Analysis: Northeast Utilities is a low-risk stock. Consider buying a 50% position in NU now; then buy another 25% in three months, if U.S. economic conditions don't worsen substantially. Under any circumstance, don't buy more than 75% of your NU position in the first half of 2009. Sell / Stop Loss if you were to buy shares in this company: $13.
Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
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Reader Comments (Page 1 of 1)
5-06-2009 @ 2:55PM
jim said...
i WOULDN'T INVEST IN IT..