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Strategies & Market Trends : Value Investing

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To: E_K_S who wrote (36741)	2/24/2010 3:57:56 PM
From: Spekulatius	Read Replies (1) of 78789

re AEE. AEE looks cheap (below tangible book) but earnings are pointing lower for the foreseeable future. You could regard it as a dividend stocks with an option for a recovery when the economy points up and/or regulates in Missouri are more friendly towards utilities. This could be a long wait though. In a similar venue, i like AYE more, because of the merger optionality (with FE) and friendlier regulators (PA utility arm is doing very well). SRE earnings may be too high, Barclays revised them down by 10% after about 1/2 the trading business is sold. Another downward revision is likely depending on what happens to the domestic power trading. Replacing a business with a 20%+ IRR with <10%IRR (if they buy it outright, a little bit higher if they build it themselves over time) dictates lower earnings. I would like to see some more color on this, or a higher discount to fair value. I think the utility operation by itself will only earn 3.5-4$ this year so SRE is not cheap by that measure.

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