Investing Topics: Utility Stocks

How many companies can one private capital firm successfully take on all at once? Paul Singer’s Elliott Management seems determined to find out.

Wall Street consensus is the U.S. Federal Reserve will officially close the book on three-and-a-half years of monetary tightening next week, by cutting its benchmark Federal Funds interest rate. But our focus needs to be on earnings and guidance, not headlines.

Bankruptcy court is fundamentally a negotiation, and this week PG&E Corp (NYSE:PCG) gained considerable leverage for its upcoming filing.

With barely a week left to go, the fourth quarter is on track to be nearly as bad for high yield bonds as it has for high yield stocks.  

The final three months of the year are seasonally strong for utility stocks. Since 1969, the Dow Jones Utility Average (DJUA) has posted positive returns in 39 Octobers and 40 Q4s, including (barely) last year.

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.

For the first year since 2005, propane distributor Amerigas Partners (NYSE: APU) didn’t raise its quarterly distribution. Rather than a sign of weakness, however, management’s decision secures the already generous 9 percent plus yield and may have set the stage for shares to break out of an 8-years plus trading range.

Depending on what you own, this might not feel like much of a rally. But the Dow Jones Utility Average closed this week up nearly 10 percent from its early February lows. And while the Average is still nearly -10 percent below the all-time high reached in mid-November, at three months and counting the uptrend is getting investors’ attention.

Strong business fundamentals, low measures of standard valuation and a generally weak technical picture: Those are the basic traits of a “value” stock, known in some circles as a contrarian bet.

Nearly four-dozen companies in our coverage universe have reported their calendar first quarter earnings since our last Utility Roundup. See the Utility Report Card for updated comments, payout ratios, Quality Grades, trading advice and other information.