AT&T Inc (NYSE: T) was the only Conrad’s Utility Investor Portfolio pick to report numbers last week. Takeaway one is quite positive: The results followed closely those of arch-rival and co-Big Two US communications company Verizon Communications (NYSE: VZ).
Who says the bond market is washed out? Certainly not Verizon Communications (NYSE: VZ).
The company’s record $49 billion bond sale has not only locked in financing for its $130 billion buyout of Vodafone Plc’s (London: VOD, NYSE: VOD) minority stake in Verizon Wireless. But it was actually doubled, eliminating the need to raise funds in Europe.
Utility stocks have posted fourth-quarter gains 36 times since 1969. But last year the Dow Jones Utility Average dropped almost 4 percent, virtually all of it during the first two weeks of November.
As we enter the fourth quarter of 2013, a number of trends and developments have investors flashing back to the final three months of last year.
The government is again in budget disarray and the deadline for default is fast approaching. The US economy is still plodding, with second quarter GDP growth of 2.5 percent. The gap between rich and poor nations in the eurozone continues to grow. And softer Asian growth is still shaking up global natural-resource markets.
But there are differences from last year.
For one thing, the stocks are cheaper. Despite what’s shaping up as a solid year for business, conventional wisdom since late April has held that dividend-paying stocks are bond substitutes—and that a change in Federal Reserve policy to “tapering” is about to drive them off a cliff.
My feature article presents more evidence that the bearish thesis about utilities' sensitivity to interest rates is more sensationalism than sense. But the more important question is, what if great companies sold off enough to make them bargains again?
The weight of evidence in this month’s Utility Report Card indicates that real bargains have emerged, three of which I am adding to my Conservative Income Portfolio.
Dominion Resources (NYSE: D) shares hit an all-time high this week. The catalyst: A proposed spin off of the company’s natural gas assets into a master limited partnership (MLP), with an initial public offering in the second quarter of 2014.
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