Michael Simpson, CFA Algonquin Power & Utilities Corp AQN-T BUY Jul 04, 2019

Time to look at this name again. It's way, way down but with a much better growth profile. Good valuation.

Estimates are 9.7c EPS and $651.8M revenue. The company has missed five of the past eight quarters. The stock is up 16% this year, as investors have shifted to safety and dividends. Valuation is still on the high side at 18X earnings. We would not miss it much if sold. We do not like making buy/sell decisions on one quarter, and would be fine exiting now. Getting a stock with 50% upside will add risks, and trying to 'replace' losses is not always advisable. We would prefer ENB in the utility-like sector, but for high growth we would look to CLS or SHOP or VHI, but only if one is comfortable with added volatility.
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Working to transition to a pure-play utility, still holding onto small (3%) renewable hydro assets. New CEO and management team doing good job so far. Most utilities are in the US, with staggered and ongoing rate reset price increases. Likes it.

He was talking just this morning to the fundamental analyst on this name, who's seeing signs of improving sentiment. Technically, starting to see the downtrend firm up across the entire space by putting in lows. Starting to see higher highs and higher lows.

Look at the 1-year chart. Big pop-up on earnings a couple of days ago. Definitely expect some near-term consolidation, but after that we're in an uptrend and he'd expect that to continue.

AQN is cheap, trading at 11.8X forward EV/EBITDA and 1.0X book. Its assets are likely worth more individually than its current market cap, making a good case for the sum-of-parts equation. But, management has recently outlined a plan to turn the company around, and acquirers generally don't like buying during recovery phases. We think if its price stagnates around these levels for several months, it would more likely become a takeover target. 
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Fallen angel. Always looks cheap on any metric. Built with unique assets spread out around the US, so not really an attractive takeover target. Don't hold your breath on that hope. Still slightly capital-constrained to be able to go after growth opportunities. Will be range bound, limited upside. Use pops in the stock to exit.

Sold off renewables (still owns some hydro), transitioning to pure-play utility. Stock was up 10% after last month's investor day, so it appears that investors believe in its back-to-basics strategy. Up 20% YTD, outperforming others. Demand for energy continues to increase. This company isn't going anywhere, and it has the best valuation amongst peers.

Turnaround story. She's holding, though may not own it forever.

The company blew up a few years ago but is now improving and has become a show-me stock. He would hold off buying for now but look at it again in six months to maybe start a position.

The chart for AQN tells the story for the sector.

Seeing signs of improvement. Both AQN and NPI have moved above 200-day (40-week) moving average, a positive. Especially so because a lot more quant funds are moving $$ in the markets, and one of the triggers they look at is whether or not it's above that technical level. It it's above, they can buy it; if not, either they can't buy it or they short it. Likes the regulated utilities -- FTS, H, EMA, CU, CPX.

If he were less cautious, he'd be more bullish. Not a big fan. More of a value play. Technically, they've been laggards. Better places to put your $$.

Last quarter was in line, on track to meet 2025 guidance. At 13x for 2027, not that cheap relative to the energy infrastructure group. Priced about the same as GEI, with a similar growth profile of 18%. Worst days are behind it.

You don't have to win on every stock. He'd rather put new $$ into GEI, KEY or ALA, simply because they're higher-quality players. But if you buy this one down here, thinks you'll win in the next year or two.