Emera Inc (EMA.TO)

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%.

(Market Call Minute.)

(Top Pick Jul 21/15, Up 20.31%) Fantastic business, regulated. It has been volatile over the last year. There is a nice little base from last fall. It will probably come off a little bit due to seasonality as August is a weak time for it and you get a bump up in Sept/Oct. He’d then like to add to it.

It is volatile but there is a base and then a nice trend line. They may have to issue some more equity and if they do he would decide if it was going to push the stock down. A great regulated business. Nice dividend. Weakness in earnings is due to some short term stuff.

Emera (EMA-T) or Fortis (FTS-T)? He is not that well versed on the individual specifics of each company, but his general view is that it is the safe stocks, all of the businesses that are perceived to be the least economically sensitive, that are what is stretching the values of the marketplace. When you look at the TSX at 20X earnings and the S&P 500 at just below 20X earnings this year, you are generally speaking of utilities. The reason is that people haven’t had any yields in bonds, so they are stretching for yield by dipping into bond equivalent stocks. He wouldn’t be a buyer of these types of businesses right now.

He is a long term holder. It is a growth utility. Extremely well run conservative company. The valuation is higher than it has ever been before. They do nice, big acquisitions, diversifying them away from the east coast markets they are in.

This has been a great stock in this environment. The company has good growth, they’ve grown the dividend, with a wonderful yield. The trouble is, what do they do for an encore? He was not a buyer at $45, and is certainly not one at $49. It’s a good hold if you own it. Hard to see their growth continuing, as the acquisitions they make are becoming more expensive.

(A Top Pick July 21/15. Up 19.76%.) What we have been seeing in the last few days are all these utility stocks coming to new highs. Also, they are coming into their seasonal time.

A little bit cheaper compared to where it could go. Has pulled back in the last week or so, which provides an OK entry point. Dividend yield just over 4%.

Probably one of those safe defensive plays, and slowly increases the yield over time. Dividend yield of 4.16%.