Northeast Utilities knows how to keep the lights on, recession or expansion

Posted Sep 9th 2009 5:00PM by Joseph Lazzaro
Filed under: Stocks to Buy

Rare is the day I'll sell an electric power generation play. I'm reiterating my Buy rating for Northeast Utilities (NYSE: NU), first recommended on May 6, 2009 at a price of $21.48.

NU's business model is low-risk -- its electric unit primarily serves customers (1.9 million in all) in land-of-steady-habits Connecticut, Western Massachusetts, and New Hampshire, and offers above-average total return, with only a modest downside risk. In this investing environment, that's impressive.

The stock has not ventured that far north since the May Buy recommendation, but the company's fundamentals remain rock solid, so if you missed the May buy-in, you haven't missed the train. The First Call FY2009/FY2010 EPS estimates for NU are $1.27 to $1.41.

Stock Analysis: Northeast Utilities is a low-risk stock. If you've already purchased the company's shares, hold them. If not, 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 before December 2009. Sell/Stop Loss if you were to buy shares in this company: $13.

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Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.

Tags: electricity, Northeast Utilities, NU, power company, PowerCompany