Rare is the day you should sell an electric power generation play. And, by extension, pull-backs in the aforementioned companies often represent Buy opportunities, which is why I'm Reiterating my Buy rating for FPL Group (NYSE: FPL), first recommended on March 3, 2009 at a price of $43.30. With FPL, the safety-plus-growth story is obvious enough. FPL provides electricity to about 4.5 million customers in Florida, covering nearly all of Florida's eastern seaboard, including the Gold Coast.
The Florida recession has hurt household formation, and FPL's shares slumped, enabling a nice scoop-up of shares at the aforementioned $43.30. If you missed that entry point, fear not: FPL is headed north, long-term. Florida's economy is down, but not out, and there's plenty of room for growth. FPL wind and solar projects, supported by federal stimulus package tax credits, will add to earnings per share. Add a potential rate increase, and a $75-80 target by the end of 2010 is not unreasonable. The First Call FY2009/FY2010 EPS estimates for FPL are $4.22 to $4.74.
Technically, as noted, FPL's shares have pulled back since testing $60 earlier this summer, but the uptrend remains intact; moreover, with a P/E around 12, these shares are a bargain.
Stock Analysis: FPL Group is a moderate-risk stock. If you've already purchased the company's shares, hold them. If not, consider buying a 25% position in FPL now; then buy another 25% in one month, if U.S. economic conditions don't worsen substantially. Under any circumstance, don't buy more than 50% of your FPL position before December 2009. Sell/Stop Loss if you were to buy shares in this company: $27.
Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
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