Dr. Ipsofacto, I don't use S&P fair value numbers. When I did look at them years back, they didn't seem to help me, so I have ignored them. They may be helpful and good, I just don't know.
I don't like financial companies' proprietary methods for fair value. First, I'm not a fan of discounted cash flow, and sometimes the analysts incorporate that in the valuation. Sometimes, some analysts use relative value -- for example what the company sells for in its sector, compared to all/some other similar companies. More significantly to me though, these fair value calculations seem to be based on a time-frame -- what the company is worth now or if your time-frame would be a twelve month holding or if holding until company's end-of-year, or calendar year, or something.
After your post that S&P's Fair Value for EXC is $45/sh., I went to the EXC S&P tear sheet, and it shows a target 12-mo price of $54/sh. I didn't see a target at their PNY page. I scanned to see what exactly comprises the Fair Value number, but I didn't find it. (Running out of time here today.)
I've got no argument that utilities in general might be fairly-valued at current price. They mostly (but not EXC) have moved up quite a bit from their 12-mo lows, and the p/e's don't look cheap, nor their dividend yields exceptional.
I'm using utility stocks for a defensive play, trying to keep some volatility down in my portfolio. While I say I'm intending to keep these stocks for a minimum holding of 3-5 years, if I can get more comfortable increasing my exposure more strongly to value stocks or stocks with better prospects, and if I run out of cash, I may reduce my positions in the utility sector. Especially, as I say, so many are up from lows already.
For now, for me, EXC seems more attractive than PNY. S&P has EXC as 4-star, PNY as 3-star rated.
Aside: I do look at S&P four star stocks. Sometimes they are at attractive prices. Not saying that EXC is better because it's 4-star, just that it's a confirming sign for me. |
