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Making Money With Pinnacle West When Everything Is Going Wrong

Ted Waller profile picture
Ted Waller


  • Pinnacle West is the main electric utility in the fast-growing state of Arizona.
  • Pinnacle is being hit with numerous headwinds that have caused a major damage to earnings.
  • The potential return for investors with a long term view is significant.

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A utility confession

Electric and gas utilities are my favorite stocks. Although I have concentrated on the new and exciting cannabis sector in recent years, my experience with utilities goes back more than 35 years. Utilities, it is said, are for "widows

This article was written by

Ted Waller profile picture
Ted Waller is a private investor who bought his first stock at age 13 (GTE) and has over 50 years of investing experience. His focus is on deep value and low risk. Acquiring wealth is a slow incremental process that requires setting goals, adherence to principles, patience, and flexibility.

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, but may initiate a beneficial Long position through a purchase of the stock, or the purchase of call options or similar derivatives in PNW over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Note on disclosure: At time of writing I am waiting for the stock price to reach my target range. I sold my shares in December 2022 at $78.79, with plans to reinvest all proceeds near 70.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (23)

I love this company. They transmit very reliable energy. I'n so impressed that I'm looking at buying the stock so I appreciate this article.
Ted Waller profile picture
@Winstonia Thanks. A well run company, but I suggest waiting for a price around 70. You don't want to overpay.
Ted Waller profile picture
PNW watchers, be on the lookout for a $70 buy price soon. The latest hawkish Fed comments could drive all utes lower.
@Ted Waller $69.20 sp = 5% divy.
Ted Waller profile picture
@sd55 That would be nice. Odds are we will see it.
After starting my position in PNW stock there were moments in time of "did I make the right decision?" I had done my due diligence analysis and I was confident that I was on the correct path while also ignoring the naysayers. I reminded myself that I had heard the same sword clamoring when I was buying NEE stock at $150/sh, and that investment doubled in price to the 4:1 split in October 2020. I have not bought any additional shares in PNW since mid-2022 and the sp would need to drop at least 10% from today's close to get me reinterested to invest more $$$.
Ted Waller profile picture
@sd55 10% lower from here would be an excellent price, but I wouldn't wait that long.
@Ted Waller Thanks for the reply and feedback.
I have nearly a full position in PNW but I always have a desire for more utes at certain sp. I can start nibbling at sub-$70 / 5% drop but prefer the 10% drop.
I'm in the process of reallocating gains - I sold my INTC position last week, and looking at other holdings - and reinvested the proceeds on last Wednesday's and Thursday's companies drop primarily to DUK, NEE, NWN with lesser $ to BKH, BMY, and JNJ. Happy investing!
Ted Waller profile picture
@sd55 OK, that makes sense.
Back to a lower set point, but aren't they also facing regulatory action resulting in lower ROE? I exited a while ago based in part on their relationship with the PUC.

Their current P/E looks attactive to peers but analysts have their 3-5yr eps growth at -3.96% (Refinitive). That's quite a deviation from peers and may prevent them from reinflating.
Old Professor profile picture
Arizona has horrible ("nonconstructive" in professional parlance) utility regulation, on par with (or worse) than even New York, which is something of an "accomplishment."
Ted Waller profile picture
@old Professor That's true, as the article says. A lot riding on the next rate case. Pinnacle should continue to grow nonetheless.
Sold PNW, reluctantly, when the political troubles arose. Not interested now.

Retired income investor (long other utilities)
WSLegend profile picture
Love Utilities too!
UTG is my preferred way to own them.
A bit more volatile, but the extra yield is worth it!
Ted Waller profile picture
@WSLegend I have UTG too. Want to add more but the price is too high. UTF is good too.
WSLegend profile picture
@Ted Waller
Anything under $30 is an ok price for UTG.
I do own UTF too, but that is much more about all Infrastructure, than just Utilities.
Ted Waller profile picture
@WSLegend True, but UTF has a very big ute component.
Abullman profile picture
I’ve had PNW for a long time and am not worried at all since they have good management and their area is still growing. I, like you, have invested in utilities for decades. My first equity was SO which I bought back in the 70’s. Through the years I accumulated many utilities topping out at 37 being held at the same time. I currently have 18 and people can say whatever they wish but I retired at 61 and live very comfortably on my dividends. The most lucrative transactions were small utilities that got bought out by the big utes at a substantial premium. I do have equities in other sectors - food, pharma, and manufacturing - but my favorites have always been the folks who keep the lights on and my house comfortable.
@Abullman Congrats to you on enjoying your retirement thanks to the "lights on" . I am building up a portfolio of dividend paying stocks as well for retirement. XEL is my largest utility but I have owned PNW on and off over the past couple of years.. probably need to get in and build a big position.
Abullman profile picture
@Valuestocks007 I also own XEL but my largest positions are in AEE, SR, DUK, AEP, ED, and ETR.
Ted Waller profile picture
@Valuestocks007 I have bought and sold PNW several times reinvesting all proceeds and DRIPs. With a coming buy I will have 33% more shares than I started with. The YOC is crazy good.
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