In today's unpredictable, seemingly continually changing investment climate, it's prudent to own an "old reliable" stock or two, and Northeast Utilities (NU) qualifies.

Northeast Utilities, first discussed here on May 5, 2009, at a price of $21.48, offers the opportunity to net a modest gain, plus a dividend.

Northeast's proposed merger with NStar (NST) should close in the second half of 2011 and create one of the largest utility companies in the United States. The deal should be accretive to earnings in 2011. Northeast's annual dividend is $1.60.

If you'd like a quintessential example of an uncertain, volatile investment landscape, the contemporary era is it. Not two months back, emerging markets were the rage. Today? Well, let's just say the rate-of-return expectations are slightly more-modest for the EMs. And this climate it can pay to own an "old reliable" stock play or two, and Northeast Utilities (NU) qualifies.

Northeast Utilities offers the opportunity to net a modest gain, plus a dividend. I first discussed the stock here on May 6, 2009, at a price of $21.48.

Northeast Utilities (NU), first discussed here on May 5, 2009 at a price of $21.48, announced Monday it will merge with Nstar Corp (NST), in a $4.17 billion deal, subject to shareholder and regulatory approvals.

NU called the deal a merger, but after the deal closes Northeast's shareholders will likely own a 56% stake in the combined business; Nstar's shareholders, a 44% stake.

It's not a U.S. stock market for the squeamish, so if you're considering adding to your portfolio or are new to stock investing and you still want to sleep well at night, consider Northeast Utilities (NU), first discussed here on May 5, 2009 at a price of $21.48.

Connecticut-based NU should provide safety, a decent dividend, and modest growth too. That's not bad, given a financial and economic environment still subject to financial market stress.

Consider this: During the depths of the market low in March 2009, NU dropped to ...about $18.90 -- hardly a portfolio-wrecker.

Option traders are pushing up call option prices in the Security Software & Services industry as well as pushing up put option prices in the Diversified Utilities industry today.

Any time the volatility skews above 1.00, it is an indication that calls are more expensive than puts. Typically, when calls are more expensive than puts, it means the demand for calls is greater than the demand for puts because investors believe the stock is going to rise in the future and they want to take advantage of that movement by buying calls.

Option traders pushed up call option prices in the general entertainment industry and pushed up put option prices in the diversified utilities industry today.

Bullish Volatility Skews

• World Wrestling Entertainment Inc. (WWE) -- part of the general entertainment industry -- came in at the top with a volatility skew of 1.18. This may come as a surprise as WWE is down 1.53% for the past month.

It goes without saying that I favor the electric power generation sector, and among them, fewer are steadier than Connecticut-based Northeast Utilities (NU), hence I'm reiterating my buy rating for the company, first recommended on May 6, 2009 at a price of $21.48.

Don't look for mega revenue growth or gargantuan customer gains with NU, just predictable, steady earnings growth, evenly split between the company's generating/distribution business and its transmission business; look for the company's transmission sector to play an increasing role in revenue growth, moving forward. NU serves about 1.9 million customers, primarily in Connecticut, but also in New Hampshire and Massachusetts.

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.

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.

MOST NOTEWORTHY: Washington Post, Harvest Natural, Memc Electronic Materials and Boston Private Financial were today's noteworthy upgrades:

• Deutsche Bank upgraded shares of The Washington Post Company (NYSE: WPO to Buy from Hold to reflect the company's exposure to the counter-cyclical education division.
• Jefferies upgraded shares of Harvest Natural Resources Inc. (NYSE: HNR) to Buy from Hold and raised their target to $17 from $11 after the company received final approval in the conversion to a mixed company. They note that conversion clears the way for renewed investment.
• Friedman Billings added Memc Electronic Materials Inc (NYSE: WFR) to its Top Picks List following its Q3 report and guidance as "solar wafer contracts," not including spot poly, are expected to increase from 15% of the total to 35%-40% in CY08 and greater than 50% in CY09.
• William Blair raised its rating on Boston Private Financial Holdings Inc (NASDAQ: BPFH) to Outperform from Market Perform after the better-than-expected Q3 results.

OTHER UPGRADES:

• Goldman added Dell Inc (NASDAQ: DELL) to its Conviction Buy List.
• NTT DoCoMo Inc (NYSE: DCM) was upgraded to Hold from Sell at Citigroup and to Buy from Neutral at UBS.
• Credit Suisse upgraded Cardinal Health Incorporated (NYSE: CAH) to Outperform from Neutral.
• Merrill upgraded Coca-Cola Femsa SA (NYSE: KOF) and Northeast Utilities (NYSE: NU) to Buy from Neutral.

MOST NOTEWORTHY: Applix, Time Warner, Apple and Level 3 Communications were today's noteworthy downgrades:

• Applix Inc (NASDAQ: APLX) was downgraded to Neutral from Buy at First Albany and SunTrust Robinson Humphrey following the acquisition by Cognos Inc (NASDAQ: COGN).
• Time Warner Inc (NYSE: TWX) was downgrade to Neutral from Buy at Pali Capital. The firm has lost faith in Time Warner's executive management team and Board of Directors and feels the outlook for AOL is concerning.
• Gabelli downgraded Apple Inc (NASDAQ: AAPL) shares to Hold from Buy on iPhone concerns and valuation as they view the iPhone price cut as an indication that sales are not living up to management's expectations.
• Buckingham Research downgraded shares of Level 3 Communications Inc (NASDAQ: LVLT) to Underperform from Neutral citing deterioration in demand for some key products.

OTHER DOWNGRADES:

• SL Green Realty (NYSE: SLG) was downgraded to Equal Weight from Overweight at Lehman Brothers.
• Citigroup downgraded shares of Volkswagen AG (OTC: VLKAY) to Sell from Hold.
• Zumiez Inc (NASDAQ: ZUMZ) was downgraded to Market Perform from Outperform at Morgan Keegan.
  
• JP Morgan downgraded Northeast Utilities (NYSE: NU) to Neutral from Overweight.
• Goldman Sachs downgraded Radiation Therapy Services Inc (NASDAQ: RTSX) to Neutral from Buy.