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Strategies & Market Trends : Value Investing

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To: Wallace Rivers who wrote (41803)	3/16/2011 10:17:51 PM
From: Spekulatius	Read Replies (1) of 78517

Exc is not a regulated utility for the most part - 80% of their earnings are wholesale energy sales (a volatile business) that they cleverly patched up as a stable business with hedges. They could hedge well because they own constant baseload generators with constant fixed costs (nuclear plants). Speaking of those, about 1/2 of their plants are build in the 70's, so they are well seasoned, to put it in kind terms. EXC has been counting on license extensions to keep them going which may not be forthcoming any more. Even more important, EXC earnings estimates are down next year, down to 3$/share. This is due to wholesale prices for electricity being much lower,which is starting to hurt since their hedges are running off. For me at least, buying a stock at 13x FWD earnings is not really much of a bargain. I find quite a few cheaper utilities around that don't have the added risk of nuclear wholesale power in a non-regulated framework.

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