Roger S. Conrad

With 2017 winding down, investors’ focus naturally shifts to portfolio maintenance and positioning for the new year. We review our big winners for potential profit-taking and our few laggards for tax-loss selling.

What’s worse for a company’s shareholders than a dividend cut? Well, two names on our Endangered Dividends List face the very real threat of insolvency.

Wall Street’s eyes are fixed on Pennsylvania Avenue in Washington, DC, where Congress continues to debate major changes to the US tax code. If and when tax reform passes, we’ll post an Alert outlining its implications for our essential-service stocks. At this juncture, we expect more positives than negatives for the names in our Utility Report Card. In cases where the news isn’t so good, investors should remember the aftermath of Canada’s “Halloween Massacre” of 2006, when the government changed the tax treatment of income trusts, eradicating some CA$24 billion in market value in a matter of days. Albeit compelling, this horror story had a happy ending for some investors: the massive returns posted by best-in-class income trusts over the subsequent years. Pembina Pipeline Corp (TSX: PPL, NYSE: PBA), for example, has returned more than 450 percent since those dark days, outperforming the S&P 500 by more than 3 times. This calamity resulted in plenty of pain—and a once-in-a-generation buying opportunity. Although US tax reform may not result in as much destruction, many utility stocks trade at historically elevated valuations, creating an environment where market participants are more likely to sell first and ask questions later. Sharp selloffs in AT&T (NYSE: T) and Dominion Energy (NYSE: D) after earnings hiccups earlier this year created buying opportunities for nimble investors. We remain laser-focused on taking advantage of similar situations in coming months and quarters. Our strategy at Conrad’s Utility Investor continues to focus on buying and holding the highest-quality dividend payers at the best prices. Achieving this goal requires keeping an open mind and poring over quarterly results, earnings call transcripts and trade publications to identify long-term winners and steer clear of the losers. We also attend several industry conferences each year and are always on the lookout for new ways to give our readers an edge.

Investors win when companies do the right thing on disclosures.

Holiday shopping for stocks? This Canadian powerhouse offers a unique value proposition for conservative investors in search of a safe yield with substantial upside.  

The recent pullback in this stock creates a buying opportunity for investors who missed it the first time.

We explore what the Nebraska Public Service Commission's approval of the Keystone XL pipeline's cross-border segment really means for TransCanada Corp.

Two of our Portfolio holdings announced third-quarter results after the November issue of Conrad's Utility Investor hit the web.

Rarely has the difference between leading and lagging stocks been as stark as today, thanks in part to the rise of passive investment strategies and exchange-traded funds that offer one-stop exposure to a sector, industry, or theme. And with the equity market trending higher, investors rightly question why they should go out on a limb by putting your money into an underperformer? Our model Portfolios have benefited from investors’ headlong rush into the utility sector, though 17 of our picks trade above our value-based buy targets. Other stocks can’t seem to catch a break, regardless of their earnings. Historically elevated valuations in the utility sector also create a scenario where investors tend to sell first and ask questions later, a dynamic that can create compelling buying opportunities. Remember what sparked a selloff in Dominion Energy (NYSE: D) in late January and early February 2017? Memory failed me despite all the time I spend in front of a Bloomberg terminal, taking notes on earnings calls and poring over quarterly results—I had to revisit my Feb. 3 Alert for all the gory details. This first-quarter hiccup fades into the background when you consider management’s guidance for stepped-up dividend growth and the stock’s 19 percent total return since that bout of profit-taking. In this market, investors must remain nimble and have the courage of conviction to distinguish real buying opportunities from falling knives—that comes from understanding a company’s underlying business. That’s why we dedicate so much time to analyzing quarterly results in the Utility Report Card and attending industry conferences.  

With many potential takeover candidates trading at sky-high valuations, interest in whole-company acquisitions has waned. We review the current slate of deals involving names in our Utility Report Card and highlight our favorite takeover plays.