My Own Analyst

Interesting Macro

ANR, a coal company, had an ugly pre-announcement today that knocked the trains off the rails, with China (FXI) breaking down too.  I see LT support on FXI at 34, and it seems to be bouncing... 

Stock Market, not Market of Stocks

2 hours to go, and clearly another crazy day.  I wasn't surprised at all by the weakness, nor do I find it alarming despite brief dips below 113.50 that I had hoped would contain.  Stocks are all over the place - no rhyme or reason from what I can gather.  The big story is just the overall market moving around violently.

An update on what looks stupidly low at the moment in the watchlist, taking the biggest losers and working up the list a bit:

• SHFL (7.6)
• MPR (9.6)
• KBALB (5.75)
• DORM (31)
• IIVI (18.10)
• DGI (19.55)
• DRIV (21.7)
• LOW 18.50

 

PPL Update

Some of you may still be long PPL from a couple of months ago when I highlighted it here.  The stock has done well with the sector and subsequent to the large capital raise following their UK acquisition announcement.  I want to share my view that the stock is still cheap, but that I would ring the bell at 29.  At that price, it wouldn't stand out in my view and you may as well own XLU or perhaps some other Utilities.  I no longer include any utilities on my watchlist, but ones I have liked have included ALE, POR and NWE.  If PPL gets to that technical resistance which also would be sub-5% dividend and you are thinking about selling it, feel free to query me on replacements within the sector, if you care.  Big picture, I do like Utilities against bonds, but, as my change in Sector Selector today suggests, I am not particularly enthusiastic at the moment.  I prefer dividend payers with more growth potential.

More on Empire District

There is probably a 4th lesson that will play out on EDE.  After further thought, while the price may be right, the timing may not.  If this type of situation interests you (buying into panic selling or over-selling), you should be careful to make sure that the panic is near an end.  My guess is that this could take some time to clear up.  I shared my views on Seeking Alpha:

Read Article

Case Study in Dividends Consumed by Tornadoes

Joplin-based electricity (and other utilities) provider Empire District (EDE) plunged today as it suspended its dividend.  I share this as a lesson in investing, as there are many.  First, the news today is several days after the tornadoes - might some quick thinking have led to more selling than the stock initially saw (23ish peak to 22.5ish before the plunge today)?  Second, investing in smaller companies (market cap was about $900mm) that aren't very diversified entails extra risk - be aware.  Third, is the stock really worth 15% less?  Investors were enjoying about 5.7% dividend yield, so today's action seems to imply about three years of no dividends.  The company stated that the suspension is only 2 quarters.  On the surface, this sure seems like a bargain.  That's the third lesson - sellers (and buyers) aren't always so rational.

PPL Question

Eric asks:

You hinted at PPL a while ago. I am sitting on a 12% gain plus have picked up a dividend along the way. Do you still like it (relative to VPU?). It’s yielding 5% compared to 3.6% for VPU so it may still have legs for another point or two.

 

Glad it worked out for you.  Utilities in general have been doing a little better, but PPL has moved more.  I wouldn't look at the yield differential necessarily.   VPU, which is the Vanguard Utility Fund for those who aren't familiar, holds different types of Utilities besides just electric utilities.  I do think PPL technically is headed to 29 before consolidating.  If I were trying to predict where it might be in a year, I would think 32 or so. 

OMG in Barron's

If you subscribe to Barron's (or maybe it's available to the public), there was an article that discussed Battery Technology, suggesting OMG as the best domestic play on electric vehicles.  The article discussed the recent weakness being a function of weak cobalt prices (down to 16 per lb from 19 lately).  One thing the article confirmed was my observation that its warchest of cash is almost all off-shore, so we shouldn't count on a large share repurchase or dividend.

 

Read Article

PPL

Igor asks:

Per your advise I purchased some PPL stock a month ago. I know they are having a new offering and was expecting the prices to drop a bit. The stock is shooting up this morning. Any idea what is going on.

As I mentioned yesterday morning, I didn't expect the stock to trade down much on the offering since it was so highly expected.  It's up today because the deal is done.  They acually upsized the equity unit portion.  I almost added this stock to my watchlist this weekend (pulling POR if so).  I am not a big fan of investing in Utilities generally, so I plan to use that POR slot for something else.  I am working on a couple of ideas now.  If you want to own a Utility, it sure looks attractive.  The UK deal makes the company much more balanced, with their earnings now very sustainable.  PPL should easily beat a portfolio of bonds.

PPL Stock Deal

I have spoken about the attractiveness of PPL a few times recently.  They are in the market with a huge equity deal to which I have alluded.  They won a UK distribution asset earlier this year, and this offering refinances the bridge loan.  They are selling 80mm shares and $750mm in equity units. 

The return isn't enough to justify Top 20, and the financial leverage leaves me hesitant to include this in the Conservative Growth/Balanced  model, but, I would add it to my Income model (if it existed). 

I am not sure it will even dip much on this news - it's been expected...

SVNT

SVNT looks well on the way to short-term resistance at 12.  In case you weren't aware, Citadel initiated yesterday.  I didn't see the report, but I saw some highlights that were positive.  Their rating is "Add" with a 14 target...