Emera Inc (EMA.TO)

These stocks tend to underperform this time of year. EMA-T is in a distinct down trend, breaking to new lows. It is below the 20 day moving average and momentum indicators are negative. There have to be better opportunities.

Selling their interest in Algonquin Power (AQN-T). Their holding was really not that significant, and he is a little concerned about the utility group in this environment, where he expects the federal reserve to kick up rates on the 15^th. If you are really keen on utilities, he would stand back and wait. You can get better rates elsewhere without that rate risk looking over your shoulder. This is not the time to rush in.

Sell? He owns no utilities, because there are only 2 ways to make money when you own them. 1.) They get earnings growth because regulators allow their rate base to grow. 2.) Interest rates fall. When he looks at utilities globally, he can find few with rate base growth. Also, if he thinks rates are going up, he wouldn’t touch any utility with a barge pole.

A good Canadian utility. Super consistent, very reliable. The dividend payout ratio is in a very reasonable range. Good valuation.

It has come back a little bit. The down side risk is about $36 according to a 5 year chart. He thinks the economy will slow rather than strengthening on the new policies from Trump. He is nibbling away on ZWU-T, which holds EMA-T. EMA-T could easily fall to $36, however.

He was looking at it a while back and decided not to buy it because seasonally utilities don’t do as well through the winter. They seem to be rolling over now. There may be a sympathy move in Canadian utilities to their US counterparts dropping due to interest rate rises. It cracked the 200 day moving average. We could get it going down to $41 to $42.

Has owned this for a long time, and plans to continue to do so. All interest rate proxies are selling off right now. He is very interested to see if that is just a blip or a trade, or if there are actually legs to this. Either way, this company is going to survive. Their acquisition looks quite positive. Even if there is rising interest rates, the Dividend payout of about 4.5% is still well in excess of 10 year bonds, and is increasing at a rate that is pretty significant. He is waiting for this trade to kind of play out, and then he is going to take a look to see if he will be adding to some of these utility and telco holdings.

*Short* It is a call on interest rates and he has been right so far. It is in a low growth/high debt situation. They acquired a utility in Florida and the result is an enormous amount of debt.

Fortis (FTS-T) or Emera (EMA-T)? Fortis used to be Canada’s growth utility, and is still a growing utility, but Emera seems to have taken its place. Both companies have made major acquisitions in the US. Now that this has Teco Energy, they probably have more of their earnings coming from the US then from Canada. Keep in mind that there is an interest rate risk for utilities. This gives a nice dividend of 4.5%, and they have a history of raising it regularly. Don’t have a huge percentage of your portfolio in companies that will be hurt by rising interest rates.

From the beginning of 2013, the stock has basically been on an upward tear, and demonstrating characteristics that are not common for the safe utility, “meat and potatoes” type of name. One of the higher-quality names in the utility space. Management has done a great job with acquisitions. The Teco acquisition makes them generate a large percentage of their revenue in the US. That is important, because regulated rates in the US are higher than in Canada. You want to be sensitive of interest sensitive stocks as a whole, because there is a sentiment that rates in the US are going to rise sooner than later. If looking for yield and can take a little bit of volatility, he would start nibbling away this, but don’t expect the returns like in the last 3 years. Dividend yield of 4.5%.

Valuations are stretched. This is one of the better ones. FTS-T would be a favourite. These have pulled back over the summer and will probably flatten out. They are still relatively expensive.

Thinks the same thing about this as he does about most Canadian utility stocks. Have gotten fairly expensive because people are seeking yield. Recently the stock has been setting back. It still has about a 23% upside potential, so it could bounce back to about 2X Book, which has been the peak of the stock price for the last 3 years. This has a decent yield and he doesn’t think there is anything to be panicky about. Not badly priced.

(A Top Pick Aug 21/15. Up 14.04%.) He has been adding to this. It is the kind of stock that makes every portfolio manager look pretty good. This has a nice long upward trend line, and every time it comes back and touches the trend line you Buy, if the fundamentals still look good.

(A Top Pick Sept 25/15. Up 15.3%.) Just completed the acquisition of Temper Electric. They’ve become one of the top 15 utilities in the US. Has a dividend growth target of 8% a year for the next 5 years, which he feels is fully achievable. Good management. Still a Buy.

This is one of the few, along with Canadian Utilities (CU-T) that scores relatively cheap in terms of its discount to intrinsic value. 80% of its businesses are tied to recurring revenues and rate resetting revenues. These can move in lockstep with any inflationary pressures. As a result of pretty strong results, and the recent acquisition of Teco Energy in Tampa Florida, it gives management the confidence to be able to keep ranking up those operating cash flows. They also increased the dividend. Dividend yield of 4.38%.