Roger S. Conrad

We continue to leverage our expertise in the utility sector and other essential-service industries to uncover opportunities for our small basket of fixed-income securities. In this update, we highlight four new bond ideas and cash out of one of our existing positions.

PG&E Corp (NYSE: PCG) suspended its dividend indefinitely because of uncertainty about the cause of the devastating wildfires that ravaged California last year—and the utility’s potential liability.

The Conrad’s Utility Investor model portfolios turned in a strong performance last year. We review our strategy and how we plan to keep the streak going in 2018.

We review our top picks from last year and highlight our favorite stocks for 2018.

The undervalued stock has a checkered past--and a bright future.

This Conservative Income Portfolio has positioned itself for the next leg of its growth story.

Takeovers, tax reform and President Trump dominated the financial headlines in 2017—and all signs point to this trend continuing well into the new year. When it comes to investment returns, however, quality remains the most important theme. And with valuations still near records, the bull market a year older, and volatility picking up in the utility sector, owning best-in-class names will be more critical than ever to delivering differentiated returns in 2018. This month’s feature article highlights key trends, as well as our picks and pans, for nine categories of essential-service companies. We also revisit our best ideas from the start of 2017; these picks delivered an average total return of 19.6 percent, walloping the 5.8 percent gain posted by our pans. Utility stocks often underperform in January, as portfolio managers allocate more capital to aggressive names. This year, the Dow Jones Utility Average’s performance has taken a hit from concerns that California utilities could face billions of dollars in liabilities related to the catastrophic wildfires that ravaged the state. Although weakness in utility stocks has taken some of our Portfolio holdings down a bit, our position in ProShares UltraShort Utilities (NYSE: SDP) has gained about 15 percent since mid-November. Meanwhile, the pullback in utility stocks has brought a few of our Portfolio holdings below our value-based buy targets. Our commitment to diversification has also paid off, with several of our holdings rallying in the new year despite weakness in utility stocks. Conservative Income Portfolio holding Pembina Pipeline Corp (TSX: PPL, NYSE: PBA), for example, hit a new high last week, benefiting from the rotation into the energy sector. That’s why we stick with stocks that lag in a given year—as long as they’re backed by high-quality businesses. Readers should check out this month’s update to the Utility Report Card, which features our take on how US tax reform will affect the each of the roughly 200 companies in our coverage universe. We also revisit the factors behind our proprietary Quality Grades.  

This high-quality utility stock is on sale after announcing an opportunistic acquisition.

Regulated gas, electric and water utilities won’t benefit directly from the Tax Cut and Jobs Act’s signature change: a reduction in the top corporate tax rate to 21 percent from 35 percent. But tax reform still creates a number of opportnities for regulated utilities, especially the strongest operators.

Roger Conrad will host an exclusive Live Chat for Conrad's Utility Investor subscribers on Jan. 9, 2018, at 2 p.m. ET.