Elevated valuations have created an environment where traders view the smallest hiccup as a chance to sell first and ask questions later — a situation that benefits nimble income investors...

Key Opportunities: Roger Conrad has identified the breakout opportunities in the telecom sector vis-a-vis some under-appreciated growth stocks in machine-to-machine communications...

Roger Conrad's 2018 Outlook Report: for Utilities and other Essential-Services

My almost 35 years covering the utility sector and essential-service stocks have taught me that no “system” can substitute for diligence and experience. I’m always looking for the next investment opportunity and reevaluating my winners and losers with an eye to their future upside potential or emerging risks.

Every month, I provide updated commentary on more than 200 essential-service stocks in my Utility Report Card, a discipline that often results in differentiated ideas that you won’t see in other newsletters or brokerage reports.

Recent finds include a small-cap water utility which trades at an undemanding valuation and recently won a contract that should double its revenue in coming years. Or a leading Japanese telecom provider that’s positioned to accelerate its dividend growth as it rolls out its 5G network and continues to ramp up its cloud-computing offering.

In addition to poring over 10-Q filings, reading transcripts of quarterly earnings calls and spending entirely too much time in front of my Bloomberg terminal, I attend several industry conferences every year to talk one-on-one with management teams, portfolio managers and analysts. You won’t get this on-the-ground intelligence in any other newsletter.

As a member, you’ll receive access to special reports with my top takeaways and best ideas from these conferences. Attending these events would cost you several times the annual subscription rate for Conrad’s Utility Investor—and that doesn’t even include meals and airfare.

Historically, these research trips have generated some of my best ideas. For example, my five stock picks from the Edison Electric Institute’s financial conference last year have generated an average total return of 31.2%, easily topping the Dow Jones Utility Average’s 24.6% over the same period.

Fellow Investor,

If you’re serious about building sustainable wealth, you owe it to yourself to give Conrad’s Utility Investor a 60-day, risk-free trial. This is a publication for serious investors, written by a serious investor—not a failed journalist. You won’t find any sound effects here—just sound advice.

Total Return for Roger Conrad's 5 Picks from 2016 EEI Conference

Source: Bloomberg, Conrad's Utility Investor | Chart Date Ranges: November, 2016 - December, 2107

These ideas include a Canadian power company that recently listed on the New York Stock Exchange, a Mexican energy company with impressive growth prospects, and a special situation that emerged when the market temporarily soured on a merger transaction.

What to Buy AND When to Buy

Identifying best-in-class names like AT&T (NYSE: T) or NextEra Energy (NYSE: NEE) isn’t as hard as knowing when to buy, when to sell and when to stand pat. And these decisions make a huge difference in how large your nest egg grows and how much risk is embedded in your portfolio.

Perhaps the most valuable information that Conrad’s Utility Investor provides are value-based buy targets that ensure you don’t overpay for quality. For example, at the start of the year, I advocated for buying NextEra Energy Partners LP (NYSE: NEP), a top-quality yieldco that traded at a dirt-cheap multiple, over its sponsor NextEra Energy, a core portfolio holding that had reached a frothy valuation.

How did that pan out?

NextEra Energy Partners LP has gained more than 75%, while NextEra Energy has posted a 36% total return.

We also send out timely alerts whenever a buying opportunity emerges.

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.

And each monthly issue of Conrad’s Utility Investor highlights my two favorite stocks to buy in the current market, based on valuation and upside potential. Conservative and aggressive investors seeking reliable dividends and above-average yields will always know where to put fresh money to work.

Whereas our aggressive picks have been market neutral this year, our monthly selections for conservative investors have outperformed the Dow Jones Utility Average handily this year.

Monthly Conservative Picks vs Dow Jones Utility Average

Source: Bloomberg, Conrad's Utility Investor | Chart Date Ranges: November, 2016 - December, 2107

What NOT to Buy

With investing, knowing what stocks to avoid is almost as valuable as knowing which ones to buy. My Endangered Dividends List, which I update every month, will help you to stay clear of names with enticingly big yields that could be at risk of cutting their dividends.

Over the past few months, three long-standing members of my Endangered Dividends List announced payout cuts:

  • Plains All-American Pipeline LP (NYSE: PAA)—A 45% Cut;
  • Suburban Propane Partners LP (NYSE: SPH)—A 32% cut
  • Windstream Corp (NSDQ: WIN)—A 100% Cut.

The Endangered Dividends List—available exclusively in Conrad’s Utility Investor — don’t invest without it!

What We Really Think

Every quarter, I host an online chat for subscribers—that’s your opportunity to pick my brain about any questions you might have about investing, the stocks covered in my Utility Report Card and who I think will win the World Series this year.

I pride myself on answering every subscriber question, so these marathon sessions can go on for 7 to 8 hours. Don’t have that kind of time? Submit your question and wait for the chat transcript to come out the next morning. My next online chat will take place at 2 p.m. ET, Jan. 9. 2018.

Subscribe today for instant access to my best investment ideas and to secure your place at my Jan. 9 online chat.

And unlike many investment newsletters, all our revenue comes from subscriptions. We don’t make money by selling your contact information to other marketers or by bombarding you with e-mails about gold coins.

We also have completed independence. Providing you with our best ideas and insights makes for happy customers—that’s what we strive to do in Conrad’s Utility Investor and our other products. Whereas investment banks often produce favorable research on IPOs on which they ran the book, we don’t have these conflicts of interest.

We also will never add a stock to our Model Portfolio or keep it in there just because it has a “good story” for marketing. You will always have our best investment ideas and unvarnished opinions—that’s the principle that underpins our business.

To your wealth,

Roger S. Conrad

Here are our 4 key themes as we look to 2018. Join us today to download each report and ensure you're in the know:

Theme One: The Future is Electric: Utilities, Renewable Energy and Electric Vehicles

Did you know that Texas generates more electricity from wind turbines than from natural gas? Renewable energy is for real—and utilities can lower their costs, reduce emissions and grow their rate base by rolling out large-scale wind- and solar-power installations. Electric vehicles have also started to gain traction, especially among investors looking to profit from this paradigm shift. Utility stocks pay you steadily growing dividends and offer exposure to these powerful, structural growth trends. 

Don’t miss out on these winners—and their generous dividends:

  • A Canadian renewable-energy giant that’s growing its dividend by 5% to 8% annually and recently started hoovering up bargain-priced assets from distressed sellers in the US. Lock in this 5.5% yield and watch the cash roll in!
  • A spin-off from a bankrupt Spanish conglomerate. This special situation is poised to take off and start growing its dividend so fast it will make the numbers in your account balance spin. 
  • A real estate investment trust that pays a big, growing dividend and specializes in financing clean-power and energy-efficiency projects. Business is booming for this under-the-radar company, while robust demand for green bonds has lowered its cost of capital and boosted its profits.

Theme Two: Telecom Titans and the Rise of the Machines: Big Dividends and Big Growth

Every quarter, the fortunes of the world’s leading telecom providers ebb and flow based on trends in their human subscriber base. 

But what about the machines? Wait, what? This isn’t a dystopian, sci-fi fantasy…

The internet of things involves the connection of a growing number of consumer products and capital equipment to the cloud for automation and data collection. The internet of things doesn’t exist purely for monitoring functionality; these systems aim to identify subtle but meaningful patterns and respond with smart, automated actions.

Mining and manufacturing have embraced these technologies, but data centers also include sensors that monitor hundreds of items—from the temperature in a rack to the vibrations coming from the server and even the electrical noise from back-up batteries. All this surveillance aims to identify issues before they become service outages that could affect customers adversely.

There are plenty of high-risk stocks you could buy developing cutting-edge technologies with big promise and lots of uncertainty. If you pick the right stock, you look like a genius; choose wrong and *POOF* your money disappears into the ether. 

Invest smarter. Buy these stocks, collect big dividends and profit from the rise of the machines.

  • A Chinese telecom giant that dominated the Mainland market and still grew its earnings after slashing its data tariff by 36%. This Beast from the East will rake in the cash from the rollout of its 5G network and an explosion in machine-to-machine communications.

  • Don’t let the name fool you. This Japanese company doesn’t specialize in telegraphs and telephones, but it does boast an ultra-fast 5G network and a rapidly growing cloud services division. Buckle up for dividend growth!

Theme Three: How to Profit from President Trump’s War for Coal

The Trump administration has clearly gone all-in on turning the supposed war on coal into a war for coal. Already, the 45th president’s term has brought the prospect of tariffs on imported solar panels, potential tax reforms that undermine incentives for renewable energy, the systematic dismantling of Obama-era air and water regulations, and proposed subsidies to keep money-losing coal-fired power plants running in previously unregulated markets. Some of this is empty rhetoric, but a handful of companies stand to make big profits.

  • This massive utility is building renewable-energy capacity to power data centers for Facebook (NSDQ: FB) and other tech giants. But Trump’s policies could give its merchant-power fleet a new lease on life. And don’t forget about its opportunities in natural-gas pipelines and offshore wind power. Buy this dynamic dividend payer today and get ready for annual payout growth of 10%.
  • One of my favorite turnaround stories in the utility sector, this company doesn’t get any respect for resuming dividend growth and expanding its regulated operations. Insiders know this stock is a long-term winner and have been buying hand over fist.
  • Subsidies in unregulated power markets would give this power producer a massive shot in the arm—and even if the Trump administration’s interventions don’t pan out, this company is poised to accelerate its rate of dividend growth.

Theme Four: FIVE Dividend Payers to Avoid at All Costs

With investing, knowing what stocks to avoid is almost as valuable as knowing which ones to buy. Don’t let these ticking time bombs blow up your portfolio.

  • A popular master limited partnership plagued by excessive leverage, cash flow shortfalls and a CEO obsessed with enriching himself at unitholders’ expense. Another distribution cut is just around the corner. Don’t be a bagholder.
  • A European utility that just announced one of the worst acquisitions in recent history, incinerating the cash on its balance sheet and increasing the risk of a dividend cut.
  • A real estate investment trust with a big yield whose biggest customer, a regional telecom on the brink of bankruptcy. Spoiler Alert! This one will end in tears, dividend cuts and massive losses.

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