Important Updates for Investors
Carla Pasternak's Premiere Issue of High-Yield International Just
Released
Income expert Carla Pasternak's debut issue of High-Yield
International covers a Taiwanese manufacturer yielding 9.5%... a
rare Mexican monopoly yielding 13.4%... and other top-performing
investments yielding up to 19.0%.
Government's Biofuel Timetable Could Spell +15,900% Growth
+15,900% growth might seem far-fetched... but it's not. In fact, it
is mandated by law. And I've identified the ONLY stock positioned to
capture this growth.
The
Silver Lining to a Falling Dollar
Despite the U.S. national debt, there is a silver lining for income
investors. This massive spending, combined with movement out of U.S.
Treasuries, is going to take its toll on the dollar, and
international income investors could reap the rewards in the form of
higher dividends. |
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A Market-Leading Utility that Can Easily Grow +40% |
Published:
December 22, 2008
Exelon (NYSE: EXC, $51.41) -- Chicago-based Exelon is one of
the nation's largest utilities, with annual revenues closing in
on $20 billion.
Through its ComEd division, the firm distributes electricity to
5.4 million customers in Illinois and Pennsylvania. Another
subsidiary of EXC supplies natural gas to nearly half a million homes
and businesses in Philadelphia and surrounding suburbs. Aside
from these two regulated entities, Exelon also generates and
sells power to municipalities, utilities and other wholesale
customers.
The firm's generating segment manages one of the nation's
largest and most diverse power portfolios. Assets include
traditional oil and coal-fired facilities, as well as greener
power sources such as hydro and wind. In fact, Exelon is the
largest provider of wind energy in the eastern half of the
country. However, its nuclear generating capabilities are what
truly distinguish the company from the crowd.
Exelon is the largest generator of nuclear power in the United
States, and the third-biggest commercial nuclear operator in the
world. The firm owns a fleet of 10 stations (17 reactors) that
account for a combined one-fifth of the nation's nuclear
generating capacity.
Last year, those nuclear plants generated 132 million megawatt
hours of clean electricity. A similar amount of power generated
by coal plants would have led to the release of 120 million
metric tons of carbon dioxide emissions. While that should
please environmentally conscious investors, nuclear energy
offers healthy monetary incentives as well.
Though commodity prices are always changing, it's not uncommon
for coal-based generating costs to reach $25 per megawatt hour,
and natural gas can be far more costly than that. By comparison,
operating costs for most nuclear facilities have been slashed in
half, tumbling from $33 per megawatt hour to around $15.
So whether electricity prices happen to be rising or falling,
low-cost nuclear reactors always yield much wider profit
margins.
Among nuclear operators, Exelon's fleet is widely
regarded as the most efficient in the industry. Last quarter,
the company booked a hefty profit of $36.54
for every one of the 48 million kilowatt hours it sold -- up
from $32.60 the same period last year.
So through the first nine months of the year, operating cash
flows have climbed from $3.5 billion to $4.4 billion. And after
capital expenditures, the company has still churned out more
than $2 billion in free cash flows so far -- while maintaining
robust returns on equity near 25%.
Typically, superior returns will invite competition. But as you
might expect, nuclear reactors are incredibly expensive to
construct, with costs running well into the billions -- not
exactly pocket change, particularly with credit remaining tight.
Plus, there is plenty of red tape involved with respect to new
permits, as well as a shortage of qualified nuclear engineers --
all barriers that help block out competitors and ensure that
Exelon remains an industry leader.
And if that wasn't enough, the company is also likely to be a
key beneficiary from President-elect Barack Obama's plans to implement a stringent
carbon "cap and trade" system -- which would penalize power
generators that rely on coal and reward those like Exelon that
own clean, pollution-free plants.
Action to Take -->
Exelon is an attractive growth and income pick. Its regulated
businesses are insulated from competition and throw off plenty
of cash, while its generating operations provide significant
upside potential.
And while not completely sheltered, the company is weathering
this economic downturn just fine. In fact, while many other
firms are scrambling to pare back their dividends, Exelon has
just boosted its quarterly distributions and now offers a decent
yield near 4%.
One caveat, the company is currently involved in a hostile proxy
fight to acquire NRG Energy (NYSE: NRG), and conservative
investors may wait to see how this development shakes out. But I
think Exelon holds promise regardless of whether this deal goes
through (assuming management holds its ground and doesn't
overpay).
Based on a fair value of $72 per share, investors could easily
see gains of +40% or more on this defensive stock.
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Nathan Slaughter
Editor
Half-Priced Stocks, The ETF Authority
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in-depth guidance on today's leading value opportunities, plus educational guidance, please subscribe to
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Disclosure: Nathan Slaughter
owns/does not own shares of EXC.
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Investing Doesn't Get Any Easier Than This |
Stock picker Amy
Calistri's strategy is as simple as investing gets -- just one idea
a month designed to make money in today's market. Invest this way
and you don't have to worry about oil prices, automaker bailouts, or
what the Fed is up to -- because every "bad" economic development
actually helps some investment or another.Your investing life can
get a lot simpler -- starting today.
Go here to learn about Amy's simple investing strategy.
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