Roger S. Conrad

More than 20 Conrad’s Utility Investor coverage universe companies have reported second quarter earnings, along with updated guidance. My comments along with updated advice, payout ratios and Quality Grades are highlighted in the Utility Report Card.

The message from the U.S. Department of Justice to the merger-manic communications and media business? "Slow your roll."

Since the July 4 holiday, there's been no shortage of potential catalysts for significant market upside or downside. However, nothing has happened to shift the cautiously optimistic view we reiterated in the July issue of Conrad's Utility Investor.

For most people, November elections are about which party will control the House of Representatives and the US Senate. That’s important. But for regulated utilities, the most critical outcomes are always the state and local races.

First half 2018 is in the books. Like the broad stock market, CUI Portfolio and coverage universe stocks experienced a great deal of sound and fury, most of which amounted to very little. The feature article highlights key trends for the nine sub-sectors represented in the Utility Report Card, and updates performance of the picks and pans from the January issue. Portfolio Update analyzes the basically flat showing of our Conservative, Aggressive and Top 10 DRIPs recommendations. Considering last year’s strong gains and the general market turmoil so far in 2018, breakeven isn’t a particularly poor result. We’ve also taken advantage of volatility to add high quality companies to the Portfolios at good prices: Comcast Corp (NSDQ: CMCSA), Sempra Energy (NYSE: SRE) and TerraForm Power (NSDQ: TERP). This month’s featured stocks AT&T Inc (NYSE: T) and Telefonica SA (Spain: TEF, NYSE: TEF) present an equally compelling opportunity to buy low. And like the above trio, they offer big potential second half gains, as headwinds depressing returns lose their force. Each is likely to get a boost sometime in the next several weeks after releasing solid second quarter results and guidance. And I’ll recap highlights and share my analysis in Utility Report Card as they report. Utility investors are also going to want to watch approaching November 2018 elections. Media focus will be on the battle for control of Congress. But as always, state results are what’s critical for our coverage universe. That’s because governors and state legislatures make the laws and appoint the regulators who set utilities’ investment and returns.

Shares of Aggressive Holding Telefonica SA (Spain: TEF, NYSE: TEF) have been hit this year by a weakened Euro/US dollar exchange rate and concern about the health of emerging markets. The company garners roughly half its revenue from South America, including Brazil.

AT&T Inc’s (NYSE: T) court victory over the U.S. Department of Justice last month was as complete as any anti-trust ruling in memory. In fact, Judge Richard Leon actually warned government lawyers not to appeal and face certain failure.

We’re at the halfway mark for 2018. And so far, it’s been an almost completely flat performance for the CUI model portfolios. Including dividends, our Conservative Holdings are lower by -2.2 percent. Aggressive Holdings are underwater by -1.5 percent and the Top 10 DRIPs are down by -1.2 percent.