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The stock of utility FPL Group (FPL), which I first wrote about on March 3, 2009, at a price of $43.30, has retreated in the past six months, but the business model is still preferred. Here's why:FPL appears to have declined on investor sentiment that the economic recovery in the company's key power market, Florida, will lag the U.S. recovery, and on a considerably lower-than-expected electric rate increase, $75 million as opposed to FPL's $1 billion request, from the Florida Public Service Commission. Hence, the exit of some short-term investors was to be expected.
Even so, FPL Group's safety-plus-growth story remains attractive. FPL provides electricity to about 4.5 million customers in Florida, covering nearly all of Florida's eastern seaboard, including the Gold Coast. A $2 annual dividend adds to the positive mix.
The First Call FY2010/FY2011 EPS estimates for FPL are $4.37 to $4.61.
Technically, as noted FPL's shares have swooned, and formed a bear hug -- a bearish stock pattern. Were is not for FPL's preferred utilities sector status, the position would have been closed. The calculation here is that the earnings predictability of the utilities sector will enable the stock to hold support at/near $45.
2010 Outlook: I view FPL Group as a long-term play, but if investors are looking to sell FPL within the year, it's probably best to take your profits after it rises to $55-56, if it fails to clear $57.
Stock Analysis: I consider FPL Group to be a moderate-risk stock. If an investor has already purchased the company's shares, I'd hold them. If not, I'd consider buying a 50% position in FPL now; then buy another 25% in one month, if U.S. economic conditions don't worsen substantially. Under any circumstance, I wouldn't buy more than 75% of my FPL position before April 2010 and I'd put a sell/stop loss at $27.
Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
The First Call FY2010/FY2011 EPS estimates for FPL are $4.37 to $4.61.
Technically, as noted FPL's shares have swooned, and formed a bear hug -- a bearish stock pattern. Were is not for FPL's preferred utilities sector status, the position would have been closed. The calculation here is that the earnings predictability of the utilities sector will enable the stock to hold support at/near $45.
2010 Outlook: I view FPL Group as a long-term play, but if investors are looking to sell FPL within the year, it's probably best to take your profits after it rises to $55-56, if it fails to clear $57.
Stock Analysis: I consider FPL Group to be a moderate-risk stock. If an investor has already purchased the company's shares, I'd hold them. If not, I'd consider buying a 50% position in FPL now; then buy another 25% in one month, if U.S. economic conditions don't worsen substantially. Under any circumstance, I wouldn't buy more than 75% of my FPL position before April 2010 and I'd put a sell/stop loss at $27.
Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
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