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Roger S. Conrad's  Instablog

Roger S. Conrad
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Roger Conrad needs no introduction to individual and professional investors, many of whom have profited from his decades of experience uncovering the best dividend-paying stocks for accumulating sustainable wealth. Roger Conrad founded and ran the Utility Forecaster and Canadian Edge... More
My company:
Conrad's Utility Investor
My blog:
Capitalist Times
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  • Investors Shouldn't Wait For A Nuclear Resurgence In The US

    Even under the International Atomic Energy Agency's most conservative projection, global nuclear power capacity will grow 26.8 percent by 2050. This assumes a complete shutdown of Japan's 50 reactors, which currently contribute 12.4 percent of global capacity.

    The bull case, on the other hand, forecasts a tripling of nuclear output.

    Projects underway in China, Turkey and the United Arab Emirates account for most of the projected new capacity. The biggest wildcard is the US.

    Despite immense financial, legal and regulatory hurdles, four new reactors are currently under construction in the US, two in Georgia by Southern Company (NYSE: SO) and two in South Carolina by SCANA Corp (NYSE: SCG). Both use Toshiba Westinghouse's AP 1000 design and are being built on sites already housing plants.

    Both projects enjoy the full support of state regulators, who are allowing the companies to recover some costs as incurred. Both have all needed permits from the US Nuclear Regulatory Commission (NRC), and they're on budget as well as on track for startup in 2017-18.

    They're also unlikely to be followed any time soon by other new plants.

    One reason is the abundance of natural gas in North America, which currently undercuts on price every fuel source but big hydropower. In late August, Exelon Corp (NYSE: EXC)--by far the largest producer from nuclear in the US-withdrew its application with the NRC to build a plant in Texas, citing low gas prices. See Profit from the Shale Gas Revolution, for more on the impact that shale deposits are having on energy markets.

    Another challenge is a ruling by the NRC under new Chairwoman Allison MacFarlane that could delay for up to two years licenses for new nuclear plants--and possibly re-licensing existing reactors--pending a full review of waste storage policy. That's in response to a recent decision by the US Court of Appeals for the District of Columbia.

    The decision won't force the shutdown of any operating nuclear plants. That includes Entergy Corp's (NYSE: ETR) Indian Point station in New York, which can remain open until the NRC makes a definitive ruling.

    It does, however, ensure natural gas will be the fuel of choice to generate power for some time to come. See How to Play the New, New Gas Story for more on how I'm playing this theme.

    Disclosure: I am long SO, ETR. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

    Tags: ETR, EXC, NRC, SCG, SO, commodities
    Oct 05 3:24 PM | Link | Comment!
  • Utilities Are In Season

    Since 1969 the Dow Jones Utility Average (DJUA) has posted a positive fourth-quarter return 36 times, including 8.3 percent last year.

    This year I'm betting on a repeat performance with ProShares Ultra Utilities (NYSE: UPW). The exchange-traded fund (NYSEMKT:ETF) is set up to rise 2 percentage points for every one-point increase in the DJUA.

    My advice is to buy as close to Oct. 1 as possible and sell after Jan. 1. Utilities' fourth-quarter gains are often unwound in the first quarter, as the institutions that dominate trading seek out higher growth investments at the start of a new year.

    At that point the better play is ProShares UltraShort Utilities (NYSE: SDP), an ETF that rises 2 percentage points for every point the DJUA falls.

    One note of caution on this year's trade: If Washington fails to compromise after the November election to prevent a tumble over the fiscal cliff, late-year market action could come to resemble what we saw in August 2011.

    In this case utility stocks won't be immune from selling, particularly with taxes on dividends likely to rise.

    So long as you don't use margin on this trade, however, ProShares Ultra Utilities should recover from even a steep near-term loss. In fact, if the economy does slow in the wake of tax increases and government spending cuts, utilities' recession-resistant dividends will be more attractive than ever.

    Those interested in protecting a large portfolio of utility stocks from the possibility of a full-scale market sell off this autumn may want to consider buying some ProShares UltraShort Utilities.

    The fund's usually a loser in the fourth quarter of the year. But it has been a big winner in those thankfully rare years when Wall Street lays an egg, and its returns will consequently offset any losses utility stocks sustain. See The top 5 Utility Stocks, for more fourth-quarter utility plays.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

    Oct 02 9:39 AM | Link | Comment!
  • NuStar Energy LP: Insider Buying Suggests Potential Near-Term Upside For This 8-Percent Yielding Limited Partnership

    NuStar Energy LP (NYSE: NS) CEO Curt Anastasio has frequently remarked that he spends 90 percent of his time talking about 10 percent of his business. That's not surprising given that the 10 percent is a perennially disappointing asphalt business.

    NuStar's focus for several years, however, has been building up its core energy transportation and storage operations. The company will start up two major pipeline projects in the Eagle Ford Shale later this year.

    And it has several other projects in various stages of development that will ramp up cash flows in 2013 and beyond.

    NuStar will also take a hit in the second quarter at its fuel marketing operation, which suffered from the sharp drop in oil and natural gas liquids prices.

    Management, however, has taken dramatic steps to eliminate future risk, deconsolidating by selling a half interest in the asphalt operation and implementing new policies to fully hedge fuel marketing commodity-price exposure.

    The moves required a substantial non-cash writeoff against NuStar's second-quarter earnings, while subpar results at fuel marketing depressed distribution coverage.

    Over the long term, however, they advance Mr. Anastasio's goal of restoring "above peer" distribution growth by systematically building the fee-based pipeline and terminals business.

    And management plans to maintain the $1.095 per unit quarterly distribution in the meantime.

    There are more than a few skeptics. That's demonstrated by generally bearish analyst opinion as well as trend-follower Standard & Poor's credit rating cut.

    Insiders, however, have been net buyers, while Fitch has affirmed the rating at investment grade.

    NuStar's 8 percent-plus yield and hefty capital gains potential make it a solid dividend investing play.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Tags: NS, long-ideas
    Aug 08 1:48 PM | Link | Comment!
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