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1/30/24 Capitalist Times Live Chat
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AvatarRoger Conrad
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Hi everyone. It's that time again. Welcome to our January live webchat for all of our Capitalist Times members. We're looking forward to fielding all your questions today, starting with a large number we received via email.
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As always, there is no audio in this chat. Just type in your questions and we'll get to them as soon as we can concisely and comprehensively. We will send you a link to the transcript of the complete Q&A following the chat, probably tomorrow morning since these things tend to go on well past COB. Transcripts will also be posted on our various websites.
Now let's get started with some emailed questions. Thanks for joining us!
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Q. This email is more about commentary on the latest chat, but there is one question contained herein. I believe your call on MDU was the call of the year. I started accumulating in 2022 and received 500+ shares of KNF post split. My cost basis in KNF was in the very low $30s. It has been on my sell list since the 6/1/23 split as I did not see a divvy coming anytime soon, but it quickly moved into the $40s so I held as it looked to me as if it was possibly basing for a pop. The pop came a bit before Nov. 1 and has continued since. I sold last week @$66 for tax planning purposes. Unreal. Here's my question-do you have any idea as to the timing of MDU's
next spin-I think it may the construction piece of the co.
 
Recession-Well, one of these years, you and millions of others will be correct and there will be a recession. As analysts are wont to do, when a forecast proves to be incorrect, the can is simply kicked down the road. New timing is attached to the forecast just as a stock analyst moves a price point of a stock. I have been in the no recession camp since the COVID recession ended in April, 2020. You have the ability to do deeper dives than I can, but my layman indicators are metrics such as GDP growth, the ISM Services Index and the U of Michigan's Consumer Sentiment Survey-in addition to a few others. 2023 1Q GDP was up 1.7%; 2Q GDP was up 2.4% and Q3 growth was a revised 4.9%. I'd be happy with 2-2.5% 4Q
as I believe some growth has been "borrowed" from previous Qs. 
The consumer accounts for about 70% of GDP-if the consumer is healthy, there is less chance of a recession. Unencumbered by the need to make any call on a recession, I simply watch my own indicators. Fed-wise, I think if inflation stays static or falls a bit, the Fed may ease 2-3 times in 2024. Anything based on 7 Fed cuts is specious, and if the equity markets are "pricing in" 7 cuts, IMO the market may take a heck of a hit.
 
EPD-Owned since 2000. Splits in 2002 and 2014. EPD's unit price has been stuck in the $20s almost since the last split (may have had one breakout above $30 since the last split). However, EPD has a solid
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history of raising distributions with plenty of coverage to spare. I look at EPD as a hybrid holding-part bond, part unit, and I'll take the double digit returns of the last 2 years any old time.
 
Yours is the only service I subscribe to other than the WSJ and IBD. Returns for the last 2 years for the utes have been diametrically opposite the returns on the S@P 500. In 2022, the S@P was basically flat while the utes gained around 19%; in 2023, S@P 500 gained 24% while the utes fell around 7% (XLU). I do not expect a defensive sector to outperform an index that includes 7 dominant stocks accounting for 30% of the weight. I'm just hoping that 2024 is a better year for the utes. Happy New
Year..—James G.
 
A. Thank you James. One reason for these big swings in relative performance is that this market is now very heavily indexed. It's also heavily invested passively, which means money is moved around by algorithm rather than individuals making decisions to a far larger extent than we've ever seen before. And to the extent that management teams are making allocation decisions, the focus is heavily on buying/selling sectors rather than individual stocks. With utilities the Wall Street "theme" was all about interest rates and inflation--and the narrative was that both would undermine utilities' CAPEX-led earnings and dividend growth guidance. That didn't happen. And in fact, over the past couple months, the yields to maturity on utilities' longest-term debt have dropped sharply--NextEra's 40-year bonds have the same YTM they did at the beginning of the year. Those should come down further as the Fed starts cutting rates and/or the economy slows. And combined with lower money market rates that make
dividend stocks more attractive, I think there's tremendous upside potential for utilities that stick with their growth guidance. Agree with you on Enterprise as well--though I think the shares will eventually get traction as this energy price cycle continues.
 
Glad you did well in MDU last year. Knife River did prove to be extremely undervalued inside the company. I think there's a good chance the services unit will prove to be as well. The company updated guidance last in late November and projected a "late" 2024 close of the spinoff. I would expect more clarity in early February when they release Q4 results and update guidance. And judging from the KNF spin, there's a reasonable expectation they'll be able to accelerate the timetable.
 
As for recession, it's obviously a very slippery word. But what's important to me as an investor is not the headline government stats. It's how conditions are affecting the underlying businesses of companies I own and want
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want to own. As you know, I look at lot at earnings, particularly the moving parts that make up the headline numbers for earnings, revenue and margins. The utilities were generally steady at the top and bottom line in Q3. But there was a definite drop off in industrial demand for electricity in many areas--again that doesn't have so much impact on utilities' earnings but it is generally a sign of weakening. And I saw much the same thing in the REITs, where the robust net operating income growth rates of 2022 and first half 2023 really tapered off in the second half.
 
That puts me on edge a little heading into 2024, though I do think dividend stocks are already pricing in a slowdown in the US. Hope that clears up where I stand on this. I have no interest whatsoever in being "right"
calling a recession. But I do want to keep abreast of what may affect earnings and dividends of stocks. 
 
 
Q. Hi Roger: I asked you many questions yesterday during the webchat. Thank you always for being so gracious in responding to my elementary questions. 
 So, here is another – truly I am dumbfounded at watching the gradual erosion in the share value of Altria (NYSE: MO). Just 7 years ago it was above $70 for the first quarter of that year. And now at $40, its yield is at 9.8%.  Why is it so unloved? Is this a value trap the way perhaps T was before they cut their dividend last year? In your last issue of CUI+ you reasoned that MO is not to be “viewed or valued as a growth company when it comes to sales.” Don’t know what you mean by that.  Can you expand? But I hope this is not a modern version of Eastman Kodak who ignored reality and lost their company. BTW- perhaps this may be an appropriate question for your next webchat. Because lots of us rely upon dividends for retirement, and I cannot be your only
reader out here who wonders if the dividend yield on MO is “too good to be true” for long before it gets cut or the company implodes? Thanks again Roger. Happy New Year to you and your family. Best—Barry J.
 
A. Hi Barry. And Happy New Year to you and yours as well. I think anytime a stock yields almost 10%, a lot of people are going to assume the dividend is in trouble--even if the company in question has a consistent record of raising the payout as Altria does. Obviously, this one carries the burden of being the dominant player in a "sin" industry that a lot of ESG money therefore won't touch. I do note that Bloomberg Intelligence scores the company very high on ESG--especially for governance.
But a lot of people are also worried about the regulation and lawsuits--which actually hurts Altria's competitors a lot more and is therefore a competitive advantage for the company.
 
When I say people shouldn't view Altria as a growth stock, I mean they're operating in a market where demand is very resilient but also has been declining over time. But unlike Eastman Kodak, no one is inventing a better version of their product. In fact, Marlboro has been consistently gaining market share. And the company also has built a leading business line in smokeless products and is forging one in cannabis as well--as that business consolidates at the finished product stage. That means revenue and earnings are considerably more resilient than the consensus appears to think--and certainly what's priced into the stock at this point at 8.4 times expected next 12 months earnings.
 
Hope that clears up where I stand on this stock. Bottom line is we're after total return, and every year we start up at nearly 10%. I think this
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year, we'll see some solid capital gains on top of that. Just a move back to a P/E of 10 would get the stock close to $50, which would mean a total return of close to 30% from here.
 
 
Q. My question is about the AES convertible that matures February 15, 2024. What exactly happens on the Matured date? I am up now. Do I just wait and enjoy the dividend and get par on 2/24/24? Same as the Centerpoint convertible a couple of years ago? Happy New Year.—Arthur H.
 
A. Hi Arthur. Barring a jump in AES Corp (NYSE: AES) common stock to a price of $25.88 or higher by February 15, you'll get the maximum
conversion ratio of 3.864 AES shares when the preferred converts to common stock. Until then, I would expect the preferred's value to closely track the value of the common. There is one more dividend of $1.71875 per preferred share that will be payable to shareholders of record probably Feb 14 and paid out on the 15th at conversion. My advice would be to hold the preferred through the conversion to receive AES shares, which are cheap at less than 9 times very conservative projections for 2024 earnings. Q4 results and guidance will be on February 26.
 
 
Q. Hi Roger. Happy New Year to you. I've attached the article herein from the WSJ's Heard on the Street section of January 4th. The author points up a concern I have regarding regulators who are starting to push back on utility rate cases. The main theme regulators are using is utilities have not
accounted for customer "affordability". This being the case it would seem to me that utilities
should not expect to be routinely granted rate increases for new Green New
Deal capital spending. I am somewhat skeptical of what I read in the Journal after the lead cable debacle articles of last summer. Based on this article would you reduce your recommended lower buy prices on Exelon, Avangrid, and Ameren? I find it becoming increasingly difficult to make informed investment decisions
these days. I would be grateful for your usual expert comments. Best—Jim C.

A. Thanks for sending Jim. Looks like Wall Street is once again predicting an earnings Armageddon for utilities on the basis of higher for longer interest rates. And based on what we've seen so far from Q4 results and guidance for NextEra, Xcel Energy and the big communications companies--as well as the big drop in borrowing costs since October
that almost no one is talking about--it looks like the consensus will be just as off base in 2024 as it was in 2023. The question is when the buying power will come back and this is a market where a lot of money is controlled by very few entities--as more than half the money in the stock market is now passively invested according to Morningstar. This WSJ article reveals sentiment that indicates we may have to be patient a while longer. But so long as utilities' continue to affirm long-term, investment-led growth guidance, recovery is only a matter of time in my view.
 
Q.Hi Roger. Hannon Armstrong Sustainable (NYSE: HASI) has announced conversion to C-Corp. What is your guidance re: HASI.
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Will dividend be threatened?—John C.
 
A. Hi John. Management said when it announced the C-Corp conversion that there would be no impact on either projected dividends or earnings growth, but rather that by moving to an "optimal tax structure" it would have "greater flexibility to capitalize on the tremendous growth opportunities" in its energy efficiency/clean energy investment niche. 
 
Hannon isn't expected to announce Q4 results or updated guidance until mid-February. But in the past month, the company has demonstrated once again both the robust market demand for its equity/debt investments and it's ability to fund them. Mainly, it's reached a deal with AES Corp to invest in a 605 megawatt solar/solar plus storage generation portfolio with a remaining contract life of 16 years to investment grade corporations, utilities and municipalities. And it announced a $200 mil private add-on offering of bonds maturing in 2027 with a yield to maturity of just 7.02%, a cost of capital meaningfully less than the 8%
% paid on an upsized offering of $550 mil in early December.
 
I wrote recently that Hannon is a show me story in the current market--a company that relies on access to reasonably priced capital in order to grow its portfolio, in an environment of elevated interest rates. And though 10 of the 13 analysts tracked by Bloomberg Intelligence covering the stock rate it buy with no sells, there are more than a few skeptics, demonstrated by very high short interest at 15.26% of float. The bet is the company will be able to stick to the plan this year until investors are increasingly comfortable that the Fed has pivoted to lowering interest rates, at which point the short interest gets squeezed. 
 
 
Q.If ES is not a current CUI portfolio holding, then would you recommend a different utility? It would not hurt my feelings for you to say “dump it” and purchase an alternative Roger. I own every company you recommend in CUI. I must have purchased the company
when Robert Rapier recommended it last year – I am thinking it must be in his newsletter. Thanks—Barry J.
 
A. Hi Barry. Over the past 10 years or so, EverSource has traded typically at a high teens earnings multiple to GAAP earnings per share, or a low 20s multiple based on recurring earnings and excluding one-time items. It's currently at 12.7 times--so a deeply discounted price relative to what have been historical norms. My view up until the last year or so has generally been that EverSource was too expensive and that there were better utilities to buy. At this point, however, the offshore wind hype that had pushed up the price has clearly been crushed out of the stock. So I don't see this as a time to sell. The great unknown is what it will be able to sell its 50% ownership interests in three offshore wind facilities for in this market. But however it comes out, proceeds will cut debt and the sales reduce operating risk.
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The dividend should remain well covered and on track for mid-single digit percentage increases, with the next late this month.
 
 
Q. Roger what MLPS that appear to be mlps really aren’t? Can an MLP issue a 1099 and still have tax deferred income. Do yieldcos have the same tax deferred income as mlps? Also is a portion of the dividend tax deferred return of capital? Thanks for the good advice for 30 years. Best--Eric D.
 
A. Hi Eric. Thank you for being a customer 30 years! Major North American midstream companies that send 1099s at tax time rather than K-1s we recommend in the EIA Model Portfolio are: Hess Midstream (NYSE: HESM), Kinder Morgan Inc (NYSE: KMI), Pembina Pipeline (TSX: PPL, NYSE: PBA) and TC Energy (TSX: TRP, NYSE: TRP). Other strong midstream C-Corps include Enbridge Inc (TSX: ENB, NYSE: ENB),
Equitrans Midstream (NYSE: ETRN) and Williams Companies (NYSE: WMB). A portion of earnings from these companies is sometimes tax deferred return of capital--though that's usually tough to forecast until you receive the 1099. For the most part, however, you're better off with the MLPs if you're looking for a way to reduce immediate taxes.
 
 
Q. Hi Guys. The high yields on TRMD, EURN, ASC seem too good to be true, high and well covered yield at fair or better value. Do these yields reflect risk I'm not seeing, or are these truly underpriced? Thanks in advance for any guidance. Also, do you have thoughts on nuclear power related stocks, be it the miners, the metal, the reactor builders, whatever? Seems inevitable that nuke power makes comeback, but that's been the case
for a decade, and no decent income stream from any stocks in the space. Guessing readers are curious about this sector too.—Cliff W.
 
A. Hi Cliff
 
Ardmore pays an extremely variable dividend, which it's actually cut three consecutive quarters since restoring it in March of this year. The current indicated yield is only about 4%, though the company says "improving spot rates" should be a tailwind this year. Torm Plc also pays a highly variable dividend. The company appears to have successfully raised capital at a low enough price to take delivery of another vessel. But it did cut guidance fairly substantially following disappointing Q3 results. And Euronav has at least for now omitted its dividend, starting with the March payment. That
follows an acquisition, which should be a net positive and is apparently the primary reason for the cut. 
 
We're due an article in EIA on tankers, as they're definitely a subject of interest to readers. And there are some reasons to be more positive on the sector than has been the case the past few years. But this is still an industry that's having problems generating any pricing power, and at a time when there's inflation from fuel costs to basic safety--the latest example being attacks on shipping in the Red Sea. So we're likely to stay more cautious and instead favor North American midstream for yield--especially with Energy Transfer yielding nearly 9%, MPLX at 9.1% and so on. Thanks for the suggested coverage
 
As for the nuclear part of your question, we are currently recommending Cameco Corp (NYSE: CCJ) in Energy and Income Advisor, as the premier uranium miner outside of Russia. And the position has already
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been quite profitable, with the lifetime extensions of several plants in the US and Europe--and reopening of facilities in Japan--boosting its ability to lock in long-term contracts. 
 
That said, investing in a nuclear energy renaissance should be viewed as a long-term proposition in our view. Southern Company has at last brought unit 3 at the Vogtle facility into service with Unit 4 apparently close to joining it. But while that's pretty clear proof the AP1000 model does work, there have been no new plants announced--mainly because companies at this time are wary of the time needed to build, the uncertainties
of permitting and the resulting potential for financing/construction cost overruns that would be ruinous for any developer not as financially powerful as Southern Company--or in a state not as supportive as Georgia has been. We've also seen the only SMR (small nuclear reactor) project in the US cancelled, potentially ruining NuScale Power Corp (NYSE: SMR). 
 
There is nuclear construction still going on in the EU and UK, mainly because there are few other alternatives for reliable electricity generation outside of fossil fuels these countries want to phase out. And China is also still building--so the global industry is still moving ahead and this is an investment theme we will continue to follow up. But there is a lot of hype here and it's critical for investors to pick their entry points for the players like Cameco.
 
 
Q. Enviva (NYSE: EVA) has fallen on hard times and now selling for less than a dollar. The company seems to have a good business model
of taking lumber industry waste and processing into bulk wood pellets. These are sold to utilities worldwide under long-term contracts. Can this company right the ship or they on the way to bankruptcy?
 
A. Hi Monroe. On January 16, Enviva (NYSE: EVA) missed an interest payment of $24.4 million--taking advantage of a 30-day grace period, which management says is related to its "previously announced comprehensive review of alternatives to strengthen its capital structure, augment liquidity, address contractual liabilities and increase long-term profitabilty." A few days later, credit rater Fitch cut it to C--a notch above "RD" or restricted default. 
 
At issue is the company's ability to renegotiate what have become uneconomic customer contracts without filing bankruptcy protection--which looks likely to happen by Feb 16 unless management is successful. The company is still processing wood waste into wood pellets used in power plants, primarily in Europe and Asia. And it's reportedly still building a facility
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in Alabama, though it has delayed an expansion in Mississippi. 
 
The big question is how much the equity would be worth if Enviva is forced to file Chapter 11. I would expect it to retain some value while bankruptcy proceedings play out. But with total debt exceeding current enterprise value, a complete wipeout with equity distributed to senior debt holders is a real possibility. It's common for shares of companies trading sub-$1 and in danger of Chapter 11 to be extremely volatile. And that's the case currently, as management attempts to negotiate better contract terms. But at the end of the day, it's going to be very difficult for this company to recover. And there are far better values in our Energy and Income Advisor coverage universes.
 
 
Q. Would you look at Fluence Energy for the next chat? I’m looking into companies that will be supporting the change in the grid and alternative energy. Fluence is making energy storage products and services, and digital applications for renewables and storage
. Are there other companies in this arena you prefer?--Donna R.
 
A. Hi Donna. I've been following Fluence Energy (NSDQ: FLNC) the past few years mainly because one of its main investors/sponsors is AES Corp (NYSE: AES).
 
It came out hot as many IPOs do but the hype factor ran out pretty fast, following the deflation of the green bubble the past few years. What's impressive, however, is that management appears to have generally been able to stick to its business plan. And as a result, sales have steadily increased, with gross margins turning positive last year. It's still running negative EBITDA and earnings, though deficits have been dropping. And the company has clearly proved that by growing economies of scale it will eventually reach profitability. Energy storage is very much in demand and the company's association with Siemens means it's been able to win orders globally, winning an order to build a 60 MW facility for Taiwan Power, which when built will account for 37.5% of that company's energy storage
capability. A lawsuit filed by a customer for work on a project in California recently hit the stock. But that complaint appears to be a one-off rather than a sign of poor performance--it's related to coronavirus delays--and is likely to be settled. 
 
Until this company reaches real profitability, it should be considered a speculative stock. And despite robust demand for projects, there's also competition. But with battery technology rapidly improving and costs declining, Fluence should also be able to systematically reduce expenses as it expands. Next earnings are early next month. I will consider adding the stock to coverage in Conrad's Utility Investor at that time, depending on progress. Thanks for the suggestion.
 
 
Q. Hi Roger. Happy report. I saw the news that HASI is now a CCorp starting with Jan 1, 2024. Will it still be included in the Reit sheet? Are the values such as price points the same? Thanks for peace of mind,--Sandra W.
 
A. Hi Sandra. Though Hannon Armstrong will no longer be a REIT by
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corporate structure, it will continue to have REIT characteristics and I will continue to cover the company in the REIT Sheet for the time being--as well as in Conrad's Utility Investor.
 
There's no change in price or yield from the conversion to C-Corp structure. And there are no expected tax changes either. I expect to hear more about the change from management when the company announces Q4 results and updates guidance in mid-February. But at this point, my expectation is management will reaffirm earnings and dividend growth guidance for 2024, with a preliminary look at 2025 and beyond as well. 
 
 
Q. Roger. ES (Eversource), EXC (Exelon), and NEM (Newmont) seem to be doing well as businesses, but their price seems to be falling. Good time to begin buying, or avoid? Thanks—Dennis H.
 
A. Hi Dennis. I think we stick with all three of them.
EverSource is not currently a portfolio holding. But the offshore wind hype that had pushed its stock price close to $100 a couple years ago has now been deflated. And whatever they get from selling their 50% ownership in three facilities, it will reduce debt and operating risk without threatening the dividend--or the likely increase later this month. Earnings are expected in mid-February and I would expect more details then. But the stock is trading at less than 13 times expected 2024 earnings versus an historic upper teens/low 20s P/E range--so it's cheaper than it's been in years. 
 
Exelon took a hit in recent weeks because of an unexpectedly harsh rate decision in Illinois--source of about 27% of earnings. But with interest rates declining the past three months, the lower set return on equity is likely to have far less impact on earnings than the action in the stock would imply. And there still appears to be a mid-single digit percentage dividend increase ahead next month as well.
 
Both of these
utilities have also been hit by early year sector weakness, as the theme of a coming earnings Armageddon due to higher for longer interest rates still hasn't died. That means we're likely to have to be patient for a utility recovery a bit longer. And the same is true for gold stocks like Newmont, which looks like it's headed for a steady result and guidance in mid-February--where we should hear a lot about synergies from the Newcrest merger. I still think this stock is headed to $100 plus the next few years and the dividend to 2-3 times the current level. But here too we're going to need patience I think--though the price of gold has been a lot stronger than many expected staying over $2,000/oz.
 
 
Q. Concerning your top 17, are you more or less equal weighting each one, or are you tilting? I usually add your favorites first, but I do avoid overloading anyone holding.  I do look to avoid the expensive options, but is that wise? The market favors a few over some others, especially those not part of ETF basket
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This is a pre-2019 inherited Roth, so the goal is to set and forget as much as possible once it is fully funded. I am converting an inherited ROTH from a generic ETF group to your REITs for various reasons. I am now avoiding adding REIT holdings in nontax-advantaged accounts.  I'll likely follow a similar pattern with your MLPs in another retirement account.
I am otherwise plenty diversified. So, I have the same weighting question with your model MLP portfolio. For fresh dollars in taxable accounts, I mostly follow your model suggestions. Then I look at your other covered stocks. So far...THANK YOU BOTH!—Arthur H.
 
A. Hi Arthur. Thank you for reading! Regarding REIT Sheet recommendations, the list is really not managed as a portfolio as such. But I do calculate performance by equal weighting. And my general view of portfolio management is it's good to balance, particularly if you're investing for yield as that's the best way to control risk.
That would also apply to a portfolio of MLPs, utilities or anything else really. I also like the idea of moving from ETFs to individual stocks--this will also give you better balance as ETFs tend to be heavily weighted toward larger capitalization REITs, MLPs etc.
 
Q. Are NextEra Energy (NYSE: NEE) and NextEra Energy Partners (NYSE: NEP) buys at these levels?—Fred R.
 
A. Hi Fred. Yes. NextEra Energy is a buy up to 80, and I've raised my highest recommended entry point for NextEra Energy Partners to 40. This follows Q4 results and updated guidance last week, which I highlighted in an Income Insights you've hopefully received "Ignore Utilities' Slow Start: Earnings and Guidance Point to a Fantastic Finish for 2024.
Both the parent NextEra and its yieldco/financing vehicle NextEra Energy Partners affirmed guidance after posting solid Q4 and 2023 results that topped guidance. Both also provided details in the numbers and commentary that underscore their strengths, including record new orders, strong progress with utility CAPEX, locking in of costs by securing supplies of solar and wind components needed to fulfill backlog and new details on financing--including $18.5 bil of interest rate swaps. it's a solid picture and both stocks are still looking quite cheap.
 
Q. Hi Roger. I bought some EXELON (symbol EXC) today below the dream price of $35. Do you still like it below $45? Why is EXC declining so much lately? Also, I just bought some Eversource Energry (Symbol ES). Do you still like it up to $90? 
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You don't have a Dream price, but at $53 that's only 60% of the highest entry. You don't have a Dream price, but at $53 that's only 60% of the highest entry. Regards—Kerry T.
 
A. Hi Kerry. Exelon took a hit in mid-December following a disappointing rate case decision in Illinois. Basically, the company’s grid plan was rejected in the state and it will have to file a revised plan by March 13. Regulators said management did not take “affordability” into account, which basically means they want to see less spending. The company’s return on equity was also set at 8.905%, below the national average of 9.5%.
 
The company did not change its 2023 guidance following the ruling. And it is worth noting that borrowing costs have come down considerably since October, which is what a higher ROE is supposed to offset—so the effect on actual earnings going forward is likely to be somewhat less than what’s priced in now. The company will announce Q4 results and update long-term guidance on February 21. I think management
will affirm the 6-8% growth rate and announce a mid-single digit percentage dividend increase as well at that time. I also think they’ll find an amicable deal with Illinois regulators. And if both are the case, we should see a relatively fast rebound to the 40s—my highest recommended entry point is still 45.
 
I also like EverSource up to a highest recommended entry point of 90. The offshore wind hype that had kept it at high valuations the past few years has been largely deflated--just when the company appears to be getting out from under the financial risk of ownership. Management has said it expects to writedown the value of these investments by $1.4 to $1.6 billion in Q4 numbers, which are expected out with guidance in mid-February. But the company still figures to receive proceeds that will allow for meaningful balance sheet strengthening. And going forward, offshore wind investment will be purely rate regulated transmission, significantly cutting operating risk.
 
I think the stock is cheap at 12.7
times expected next 12 months earnings. And the dividend is well covered with earnings, with an increase on tap later this month. I think you have a great entry point.
 
Q. Dear Roger, Not too long ago, you wrote that you thought Utility stocks might be the "new tech" stocks for 2024, implying that there will be a large inflow of money into the sector. Yet more recently you cast doubt on the Fed's pivot to lower rates, which would seem to create a more congenial climate for dividend stocks. Do you still believe that the strongest utility stocks -- say, the ones you have selected as your 2024 "picks? -- are going to have a robust 2024? (And to that list would you add companies like Duk, ETR, BEPC, and NI?). Or is a FED pivot unnecessary for outperformance by strong stocks in the sector? Many thanks, Jeffrey H.
 
A. Hi Jeffrey. That's still what I think will happen this year--a rotation to the rest of the market from technology stocks, with utilities as big beneficiaries, a similar market to what we saw in 2000
following the Nasdaq's doubling in 2000. It's hard to say what the catalyst will be as well as the timing--probably a real Fed pivot though not necessarily. But the generally low valuations of the best in class utilities do give us a nice entry point to bet on that, with not a lot of downside risk so long as companies can stick to guidance. I do think Duke, Entergy, Brookfield and NiSource should do well this year.
 
Q. Dear Folks, Newmont (NEM) has been dropping steadily, as have other generally well-regarded gold stocks, such as Barrick (GOLD). Do you see a specific problem with NEM -- or is this just general sector underperformance for gold, given the market's uncertainty about FED rate cuts. Would you say this is an opportunity to pick up some NEM shares, especially given geopolitical uncertainty? 
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