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mikelinnyc
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I am currently pursuing an MBA at Columbia Business School, and previously worked with M&A and equity market applications at Bloomberg LP. My stock selections are generally value plays and attempts at uncovering Warren Buffett "cigar butts" on the market. They're always there. You... More
  • Public Service never looked so good... 0 comments
    Aug 9, 2011 1:57 PM | about stocks: PEG

    PSE&G's stock price fell about 13% over the course of trading since their relatively strong earnings announcement on August 3rd.  The stock has fallen victim to the brutal market sell off, and serves as a perfect example of the confusion felt by investors in the equity markets.  In short, corporate earnings continue to impress while economic numbers sour long-term market forecasts. (An interesting read on the topic:  http://www.economist.com/node/21525440)  

    So while President Obama pleads with CEO's of America to hire aggressively, I'm looking no further than Public Service Enterprise Group for steady income and great value while global economies continue to show signs of weakness.

    Just 7 days ago PSE&G announced earnings numbers that matched their steady, if not dull, market price.  Since September of 2008 (3 years!) this stock has traded within a tight $7 trading range of $27 and $34.

    In that time they have shown consistent earnings and revenue, and in the last quarter beat estimates and reported improved income numbers from 2010.  The company has managed to maintain this level of growth with industry low debt ratios and growing cash flow from operations.  Despite uncertain market conditions, PSE&G's management maintains their 2011 guidance for earnings per share and also announced more aggressive capital investment projections for the next few years.  In other words, this business is consistent and healthy.  

    Utilities are never sexy, but with the market sell off this company is now a bargain.  At a P/E ratio below 9, ycharts.com ranks PSE&G in the 93rd percentile (7 out of 101) for this ratio among all sector peers in utilities, and the stock itself has not traded this cheap relative to earnings since 2004. 

    You can't talk utilities without mentioning dividends, as well.  In short, they have a 10 year history of consistent dividend increases, and at prevailing market rates, PSE&G offers a generous 4.75% yield.

    Bottom Line:  In such volatile markets, PEG is a great low beta stock trading at a very attractive price. 

     

    Disclosure:  I am long PEG.

     

     

    Themes: utilities Stocks: PEG
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