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George Fisher

 
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  • Energy Bonds Causing Havoc And Stress For All High-Yield Bond Fund Holders
    Yesterday, 6:24 PM BSJF, BSJH, HYG 7 Comments

    Summary

    • 18% of energy high yield bonds are currently trading below their face value.
    • Energy high-yield bonds carry almost twice the risk premium as does industrial bonds and almost three times the risk premium associated with healthcare bonds.
    • It is not time to panic sell but rather for investors to be aware of their exposure to the problems in the oil patch through their high-yield bond fund.
  • Updates: Utility Firms Otter Tail, Avista, And Exelon
    Sun, Dec. 14 AVA, EXC, OTTR 7 Comments

    Summary

    • None of the three firms has outperformed the Morningstar index of diversified utilities over the previous 5-yr and 10-yr timeframes.
    • Exelon is most undervalued based on an anticipated 12% EPS growth rate, but fairly valued based on historic P/E ratios.
    • Even with depressed earnings due to weak power markets, Exelon has generated 3-yr average returns on invested capital above their cost of capital while the other two firms have not.
    • Avista has the best regulatory environment assessment profile and is the greatest “pure-play” regulated utility of the three.
  • Fluor: Industrial Construction Company Getting Rave Reviews
    Sun, Nov. 23 FLR 6 Comments

    Summary

    • Fluor's growing backlog of orders will fuel several years of revenue growth.
    • Only 60% of the business is related to oil infrastructure, but the stock has been taken to the woodshed along with all energy-related equities.
    • Even with a forward PEG ratio of 1.00, current share prices may offer the potential of about 18% total annual return over the next two years.
  • Mario Gabelli - Not So Hot 2014 Picks, Or At Least Not Yet
    Sat, Nov. 22 CHMT, DBD, GBL 6 Comments

    Summary

    • Gabelli’s analysts and researchers are PHDs – Poor, Hungry and Driven.
    • Over the past four quarters, GAMCO has invested over $330 million in his January 2014 stock picks.
    • If you believe Gabelli, Diebold, Chemtura and Weatherford International could double. Journal Communications, National Fuel Gas and Post Holdings could gain +50%.
  • Suncor Is A Buy, Especially With Energy East On The Horizon
    Editors' Pick • Fri, Nov. 21 SU 36 Comments

    Summary

    • Forget the Keystone Pipeline. “Canadian Nation Building” will include a pipeline to the Maritimes for export of oil sands production.
    • The discount to Brent pricing for WCS is disappearing.
    • Even with $80 to $85 Brent pricing levels, SU expects to be 2015 free cash flow positive, including an increase in cap ex by 6% to 16%.
    • Positive free cash flow coupled with rising cap ex is not usually discussed in the current low oil price environment.
  • 4 Utilities For 2015 And Beyond
    Thu, Nov. 13 EXC, ITC, NFG 4 Comments

    Summary

    • ITC is the only independent FERC regulated transmission company and this differential is fueling higher allowed ROE.
    • Southern Company‘s completion of its massive construction projects by 2018 will drive free cash flow higher, with investors collecting a comfortable dividend while they wait.
    • Is the earnings turnaround at Exelon finally here? JPM’s recently announced pricing structure for merchant power reliability would seem to aid in that important objective.
    • National Fuel Gas will be transforming itself, with the assistance (or is it insistence) of Mario Gabelli.
  • What Is Tax Loss Harvesting And Why Should I Care?
    Wed, Nov. 12 CBI 21 Comments

    Summary

    • There is only two weeks remaining to institute this Tax Loss Harvesting strategy.
    • This strategy potentially reduces taxes due while maintaining exposure to the targeted stock.
    • With the advent of online inexpensive trades, this year end strategy should be a "no-brainer".
  • Algonquin Power: Diversified Canadian Utility With Mainly U.S. Revenues
    Editors' Pick • Thu, Oct. 23 AQUNF 14 Comments

    Summary

    • Algonquin Power is a stealth water utility, representing 5.8% of revenue. Pending acquisition will increase its water customer count by 70%.
    • Recent dividend increase of 12% and change in payment currency is U.S.-shareholder friendly. Dividend growth investors should take notice.
    • Many utility investors, even income investors looking for small-cap opportunities, overlook Algonquin Power.
  • Exelon: Nuke Reliability Worth An Additional $5 A Share
    Fri, Oct. 17 EXC 17 Comments

    Summary

    • New PJM capacity performance proposal is a profit booster for Exelon.
    • If implemented, proposal could add $0.17 to $0.25 a share in earnings, or about 7% to 10% increase.
    • Due to the complexities, changes are proposed to be phased in from 2015/2016 to 2018/2019.
  • Utilities: 'Funny How Time Slips On Away'
    Mon, Oct. 13 AEP, AES, CNP 10 Comments

    Summary

    • Net ROIC, or ROIC minus WACC, is a telltale indicator of potential total return out-performance.
    • Dow Jones Utility Index's electric utilities that provided higher net returns on their complete capital structure generated 28% higher 10-yr shareholder total returns.
    • WACC calculations are now just a click away, making this very important fundamental available to all investors.
  • For Equity Income Investors, Southern Company Has The Best WACC Of Its Peers
    Sun, Oct. 5 SO 17 Comments

    Summary

    • With WACC of 3.8%, Southern Company's lower cost in this capital-intensive sector is a strong advantage for shareholders.
    • The firm's debt profile offers lower interest cost than many of its peers and its regulatory environment offers one of the best in the country.
    • Southern Company has interesting high-tech coal-power generating licensing potential and initial plans for distributed generation.
  • Utility Equity Research In The 21st Century Part 1: Regulatory Environment, ROIC, WACC, Hurdle Rate
    Mon, Sep. 29 AES, EXC, SO 2 Comments

    Summary

    • Regulatory environment plays a key role in the long-term performance of regulated utilities.
    • Return on invested capital should be a key fundamental ratio for all utility investors.
    • Weighted average cost of capital calculations are now just a click away.
  • AES Corp.: Electric Utility For Emerging Market Investors
    Thu, Sep. 25 AES 4 Comments

    Summary

    • AES generates power in 20 developing countries and only 24% of pre-tax profits are produced in the US.
    • Management has been realigning assets over the previous 2 years, returning cash to shareholders, funding cap ex, and reducing debt.
    • 37% of pre-tax profits have added risk with exposure to FX fluctuations, unusually high for a plain vanilla electric utility.
  • National Fuel Gas: Buying A Dollar Of Value For 75 Cents, Or Buy, Buy, And Then Buy Some More
    Fri, Sep. 19 NFG 8 Comments

    Summary

    • Mario Gabelli estimates National Fuel Gas is worth $100 share while the current market price is $74.
    • Gabelli has filed the paperwork to place a proposal for shareholder vote to split the utility into a separate company, similar to Oneok and One Gas.
    • At today’s price, not only is the firm undervalued by 33%, it offers the most Marcellus acres per $1 million of Enterprise Value compared to its peers.
  • Hong Kong And China Gas: Gas Utility With China Growth Prospects
    Editors' Pick • Fri, Sep. 19 HOKCY 1 Comment

    Summary

    • Hong Kong and China Gas (TownGas) offers exposure to the growing gas distribution business in China. The firm is the largest utility serving both HK and the Mainland.
    • 55% of revenues are from Mainland China, and gas volumes are expected to continue their double-digit growth for the foreseeable future.
    • Opportunities encompass the entire natural gas "food chain" (ex-exploration) - from pipelines and midstream facilities, to retail/industrial distribution, to vehicle filling stations, to infrastructure.
    • Russia's massive $400 billion gas contract with China amounts to only 20% of consumption growth to 2020.
  • How Is Your Regulated Electric Utility Handling Distributed Generation?
    Fri, Sep. 12 AEP, AQUNF, AWR 25 Comments

    Summary

    • Rooftop solar panel installations are creating structural changes to the regulated electric utility business.
    • The extent of this disruptive technology affecting a specific utility’s bottom line will be determined by the company's programs and state regulations.
    • It is not too early to begin adding Distributed Generation to your regulated electric utility due diligence.
  • If You Like Chicago Bridge & Iron, You May Want To Own Oil Infrastructure Construction Firm AMEC
    Wed, Sep. 10 AMCBF 16 Comments

    Summary

    • AMEC is expanding its presence in the oil and gas infrastructure engineering and construction industry by acquiring Foster Wheeler.
    • Earnings revisions to the downside, mainly due to currency fluctuations, will hurt share prices in the short term, but the Foster Wheeler acquisition will be the future driver of higher earnings.
    • While not as large as CBI’s backlog, AMEC and Foster Wheeler combined have an order backlog of $10 billion. This represents about 15 months of business.
  • TransAlta: Power Producer's Reset Preferred Shares May Be Preferred Over The Common
    Mon, Sep. 8 TAC 7 Comments

    Summary

    • TransAlta has been a poor selection in the Independent Power and Renewable Electricity Producers industry.
    • TransAlta 2014 ocf may cover cap ex plus dividend, but just barely.
    • Better times may lie ahead, but not until 2018.
  • Geothermal Power Producers - Lowest Levelized Cost, Base Load Compatible And A 100-Year History
    Editors' Pick • Tue, Aug. 26 CPN, EGDCY, LXU 9 Comments

    Summary

    • Geothermal power has the lowest levelized costs of all power generating plant designs.
    • There are a few smaller companies offering exposure to the geothermal industry.
    • Geothermal is the only alternative fuel that is also base load compatible.
  • Duke Energy - Buy For Income And Income Growth, But Not For Value
    Fri, Aug. 22 DUK 9 Comments

    Summary

    • Duke Energy's dividend growth could increase from 2% to over 3.8%.
    • Management's new 2014 guidance is $4.50 to $4.65 EPS and a 4% to 6% growth rate, with a target of 65% to 70% dividend payout ratio.
    • The Multi-Utilities industry is technically better positioned than Water and Gas Distribution industries for further share price increases.
  • Avista: Fully Valued Utility With Adequate Income And Acquisition Potential
    Mon, Aug. 18 AVA 6 Comments

    Summary

    • Current stock valuations leave some room for multiple expansions, but management’s ROIC performance should not be valued at a premium.
    • Avista’s renewable generating assets may be attractive to others.
    • Total returns have been closer to the S&P 500 than the outperformance of the Multi-utility segment.
  • Exelon: Buy The Dip
    Mon, Aug. 18 EXC 18 Comments

    Summary

    • Natural gas pricing will rise in the Northeast.
    • Power demand and pricing is recovering in PJM territories.
    • While the merchant power investment story is being diluted by regulated asset acquisitions, 50% of future earnings will be tied to commodity pricing, which looks promising.
  • Southern Company - Still A Buy, But Currently Fully Valued
    Thu, Aug. 7 SO 8 Comments

    Summary

    • Reduction in Cap Ex budgets will improve the current negative Free Cash Flow Minus Dividends spread.
    • Southern Company’s stock price is fairly valued.
    • Dividend should continue to grow at a 4% annual rate.
  • Utilities And Rising Interest Rates: Fact Or Fiction?
    Mon, Jul. 14 XLU 21 Comments

    Summary

    • History points to rising interest rate cycles of 2004 to 2007, 1993 to 2000, and 1986 to 1989.
    • At the top of the cycle, the yield curve flattens.
    • Utilities continued to provide positive total returns from the beginning of tightening to the end of tightening. Shareholder problems lie in the down cycle, not the up cycle.
  • How Much Money Are You Planning To Lose In Your Bond Portfolio?
    Thu, Jul. 10 AGG, BOND, BND 61 Comments

    Summary

    • Goldman Sachs moves up the date for interest rate hikes, and pegs a 2018 Fed Fund rate at 4.0%.
    • Review past yield curves for a possible glimpse into the future.
    • It is easy to determine interest rate risk for individual bond fund portfolio designs.
  • CLP Holdings: 4.1% Yield Limits Potential Downside
    Mon, Jul. 7 CLPHY 2 Comments

    Summary

    • A turn in Australia’s energy markets is needed to get back on track for even modest dividend growth.
    • CLPHY 10-yr total returns have equaled S&P 500 with a beta of just 0.20. Same return, substantially less volatility.
    • Current share valuations are in line with both CLPHY’s 5-yr average and its US counterparts.
  • Electricity Transmission Assets: No Longer A Crown Jewel?
    Tue, Jun. 24 AEP, DUK, EIX 8 Comments

    Summary

    • FERC is lowering the allowed base ROE for transmission investments.
    • The ROE incentive for transmission investments over state-regulated assets will evaporate for most utilities.
    • The Midwest ISO could experience the highest reduction in profitability based on a 14.5% reduction in allowed ROE.
  • PPL: A Utility Completing Its Evolution
    Mon, Jun. 23 PPL 8 Comments

    Summary

    • PPL is jettisoning its merchant power business by merging with selected assets of Riverstone to form Talen Energy.
    • It seems odd timing, as PJM merchant power pricing seems to finally be improving.
    • Dividend growth going forward will probably remain sub-par.
  • Chicago Bridge And Iron - Speculative Buy
    Fri, Jun. 20 CBI 31 Comments

    Summary

    • CBI has a long history of creating shareholder value, based on its cyclicality. In addition, CBI has a long history of successful acquisitions and integrations.
    • Management needs to reply to the accusations – and the sooner the better. But shareholders should not hold their breath waiting.
    • Even with the current price weakness, CBI is “fairly valued”, and a “speculative buy” until the dust settles.
  • FirstEnergy: Turnaround In Store For Patient Shareholders
    Tue, Jun. 17 FE 11 Comments

    Summary

    • 2014 should be a trough year for FirstEnergy.
    • After a dividend cut in January, weaker players have been shaken out with trading volume since the announcement about equal to shares outstanding.
    • FirstEnergy is eerily similar to Exelon, but share prices have not mirrored Exelon's 36% total return y-t-d.
  • Consolidated Water: Not Very Compelling Valuation
       • Tue, Jun. 10 CWCO 15 Comments

    Summary

    • While desal is an intriguing industry with growth prospects, Consolidated Water has not been best in class.
    • Operating Cash Flow and Return on Invested Capital has been in a downward spiral for several years.
    • Mexican desal project could be substantial, but will take years to bring on line, after finding a financial sugar daddy.
  • American States Water: Higher Political Risk Makes Watching From The Sidelines Prudent
       • Wed, May. 28 AWR 25 Comments

    Summary

    • With a severe drought in California, the political risks for American State Water increases.
    • American States Water has outperformed the S&P 500, but not so much its peers.
    • Better investment opportunities and lower risk may lie in water utilities serving the Northeast, Southeast, and Eastern Midwest.