Jim, I like the idea of dividend stocks in this environment. I also agree that the utilities have been hammered. But I'm not sure they've found bottom yet.
Found this on yahoo. Applies to REI, but I think it applies to most of the sector as well. I'm concerned about rates coming down further and more capacity coming on line. What's your take on this?
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This stock, and its spin-off RRI, are the result of a failed strategy.
REI is approaching its 52-week low, while RRI is down over 50% from its IPO price just several months ago.
What's wrong you asked? In a word, the generation, trading, and international strategies.
Merchant power generation was supposed to be a huge engine of growth. Now with prices having plunged, ever increasing capacity coming on line, and a fiercely competitive environment, this business looks terrible. Add to that the growing regulatory backlash, likely voiding of favorable long-term contracts, and general economic weakness, and you have a recipe for disaster.
Trading was also supposed to be a great business. Unfortunately that just isn't the case, and never has been. Trading is not a consistent profit generator and doesn't have identifiable long term growth. There is no value here. Look at Enron's business for a comparison.
International? REI top-ticked the market with its purchase of UNA, and now it wants (needs) to dump it at prices likely well below what it paid. In Europe, REI has all the same problems it has here, but with even more unfavorable competitive and regulatory environment. |
