We recommended the following stocks for Q3 �C Portfolio - AEP, AWK, DUK, ED, FE, SCG, SWX
Q4 �C Portfolio �C AEP, AWK, DUK, ED, FE, SCG, SWX
American Electric Power Company Inc.?? (NYSE:AEP)
American Electric Power Co. (AEP) is a holding company that primarily operates electric utility services through its regulated subsidiaries. The utility services include generation, transmission and distribution of electricity for sale to retail and wholesale customers in the U.S. AEP's non-regulated operations include the AEP River Operations subsidiary. In 2010, utility retail sales accounted for 79.6 percent of consolidated revenue; wholesale sales 13.8 percent; and other 6.6 percent. It provides electric utility services to about 5.3 million customers in 11 states over a total area of 197,500 square miles.
Yesterday, the stock gained $0.59, or 1.59 percent, to close at $37.71. This compares with a 52 week range of $33.09 to $40.08.
Based on a log-normal random walk, within the next one month there is a 95 percent chance the stock price could be between $34.35 and $42.01. Buying at current levels could amount to a profit-loss ratio of 1.28 to 1.
American Water Works Co. Inc.?? (NYSE:AWK)
American Water Works owns utilities that provide water and wastewater services to residential, commercial and industrial customers. The company provides drinking water, wastewater and other related services to approximately 15 million people in 30 states and two Canadian provinces.
Its diverse geographic and regulatory environment and largely residential and commercial customer base enable cash flow stability. The company's relatively low operating risk for its non-regulated operations, above-average service territory, and acquisition-based growth strategy make it an attractive stock.
Yesterday, the stock gained $0! .11, or 0.37 percent, to close at $29.93. This compares with a 52-week range of $23.93 to $31.49.
Based on a log-normal random walk, within the next month there is a 95 percent chance the stock price could be between $27.01 to $34.35. Buying at current levels could amount to a profit-loss ratio of 1.51 to 1.
Duke Energy Corp.?? (NYSE:DUK)
Duke provides electric and gas utility services, sells wholesale power, and has investments in various South American generation plants. Its operating subsidiaries include Duke Energy Carolinas LLC, Duke Energy Ohio Inc., Duke Energy Indiana Inc., Duke Energy Kentucky Inc., as well as the company's Latin American subsidiaries. Duke and Progress Energy Inc. announced an agreement to merge in January 2011.
Incorporating the operations and anticipated financial profile of Progress would not affect Duke's ratings and could strengthen the credit profile over time as the combination produces a utility holding company that is bigger, more diverse, and capable of improving its financial performance and balance sheet. I expect the pending merger with Duke Energy to close by year-end.Yesterday, the stock gained $0.20, or 1.01 percent, to close at $19.99. This compares with a 52-week range of $16.87-$21.02. Yesterday, the company said it will sign a 5-year, $6 billion credit agreement with 30 financial institutions, replacing a credit facility set to expire next year. The deal is notable because it marks the highest level of participation ever by Chinese banks in a U.S. electric utility's credit facility, according to Duke energy.
Based on a log-normal random walk, within the next one month there is a 95 percent chance the stock price could be between $18.49 and $21.95. Buying at current levels could amount to a profit-loss ratio of 1.31 to 1.
Consolidated Edison Inc.?? (NYSE:ED)
Consolidated Edison is a holding company ! with ele ctric and gas utilities serving a territory that includes New York City (except part of Queens), most of Westchester County, Southeastern New York state, Northern New Jersey, and Northeastern Pennsylvania.
The regulated subsidiaries include Consolidated Edison Company of New York and Orange and Rockland Utilities; and the unregulated subsidiaries include Consolidated Edison Solutions, Consolidated Edison Energy and Consolidated Edison Development. I expect the two regulated utilities to provide substantially all of ED's earnings over the next few years. Consolidated Edison has an excellent business risk profile that largely reflects the company's low-operating-risk electric and gas transmission and distribution operations and a conservative growth strategy. The service territory is large with a diverse economy and has recently experienced modest customer growth.
Yesterday, the stock gained $0.07, or 0.12 percent, to close at $57.23. This compares with a 52-week range of $47.51 to $59.89.
Based on a log-normal random walk, within the next month there is a 95 percent chance the stock price could be between $53.31 and $62.91. Buying at current levels could amount to a profit-loss ratio of 1.45 to 1.
FirstEnergy Corp.?? (NYSE:FE)
FirstEnergy is a diversified energy company involved in the generation, transmission and distribution of electricity as well as energy management and related services. In 2010, electric utilities accounted for 93.9 percent of consolidated revenue, and the unregulated businesses 6.1 percent. On February 25, 2011, FirstEnergy completed a merger with Allegheny Energy Inc., a Pennsylvania-headquartered electric utility holding company serving 1.6 million customers in portions of Pennsylvania, Maryland and West Virginia.
Under terms of the transaction, Allegheny shareholders received 0.667 of a share of FirstEnergy for each Allegheny share. Upon completion of the t! ransacti on, FE shareholders had an approximate 73 percent interest in the combined company and Allegheny shareholders 27 percent. I believe the merger could result in potential synergies of about $180 million by the end of the first year and $350 million by the second, with about half occurring in the competitive generation business.The company's low-cost, baseload power generation plants in Ohio and Pennsylvania, relatively low-risk transmission and distribution operations, generally constructive regulatory relationships, good cash flow generation and liquidity, and stable financial profile make it an attractive investment.
Yesterday, the stock gained $0.81, or 1.93 percent, to close at $42.75. This compares with a 52-week range of $35.02 to $46.51. Based on a log-normal random walk, within the next month there is a 95 percent chance the stock price could be between $38.04 and $48.38. Buying at current levels could amount to a profit-loss ratio of 1.2 to 1.
SCANA Corp.?? (NYSE:SCG)
Scana Corp.'s primary regulated operating businesses are South Carolina Electric & Gas, Public Service of North Carolina, SCANA Energy and an intrastate pipeline operation in South Carolina. The company expects its consolidated regulated base of more than 1.4 million electric and gas customers will grow 2.4 percent annually.
I favor this stock as more than 90 percent of its consolidated cash flows are from regulated electric and gas utility operations. Moreover, the company benefits from supportive regulatory environments in South Carolina and North Carolina, and operating diversity with operations in two states. In addition, above-average population growth in SCG's service areas, strong cash flow generation and a healthy dividend help make the stock attractive.
Yesterday, the stock gained $0.48, or 1.17 percent, to close at $41.45. This compares with a 52-week range of $34.64 to $43.19. Based on a log-nor! mal rand om walk, within the next month there is a 95 percent chance the stock price could be between $37.61 and $46.09. Buying at current levels could amount to a profit-loss ratio of 1.21 to 1.
Southwest Gas Corp.?? (NYSE:SWX)
The company is composed of two business segments: natural gas operations and construction services. As of December 31, 2010, Southwest purchased and distributed or transported natural gas to more than 1.8 million residential, commercial, and industrial customers in geographically diverse portions of Arizona, Nevada, and California. Its low-risk monopoly gas distribution business, a supportive regulatory environment in California and Nevada, a large and stable residential and commercial customer base, and strong internal cash generation, and adequate liquidity position make it an attractive investment.
Yesterday, the stock gained $1.14, or 3.08 percent, to close at $38.19. This compares with a 52-week range of $32.12 to $40.59. Based on a log-normal random walk, within the next month there is a 95 percent chance the stock price could be between $33.68 and $44.56. Buying at current levels could amount to a profit-loss ratio of 1.41 to 1.
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