Norman Levine Transalta Corp TA-T DON'T BUY Sep 24, 2012

Our PAST TOP PICK with TA is progressing well.  To remain disciplined, we recommend trailing up the stop (from $8.50) to $11.00 at this time.  

Our PAST TOP PICK with TA has achieved its target at $13.  To remain disciplined, we recommend covering half the position at this time and trailing up the stop (from $11) to $12.  

Our PAST TOP PICK with TA is progressing well.  To remain disciplined, we recommend trailing up the stop (from $12.00) to $13.50 at this time.

Our PAST TOP PICK with TA is progressing well.  To remain disciplined, we recommend trailing up the stop (from $13.50) to $16.00 at this time.  

Our PAST TOP PICK with TA has triggered its stop at $16.  To remain disciplined, we recommend covering the position at this time.  Combined with our previous guidance, this will result in a net investment gain of 46%.

TA holds a basket of high-quality power generation facilities including renewables.  The company is prudently using some cash reserves to aggressively retire debt and buy back shares.  It trades at 21x earnings and supports a 25% ROE.  We recommend setting a stop-loss at $9.50, looking to achieve $16.00 -- upside potential of 28%.  Yield 1.9%

Long a favourite of Stockchase Michael O'Reilly, this Alberta renewable energy company sank over 2% during April's tariff-induced slide. The sell-off helped to halve TA's PE of 40x from last September, and is now trading far lower than the industry's 33x. Even better, is the confident forward PE of 33.57x. Other qualities: a low beta of 0.55 and low payout ratio of 40% to support the 2.12% dividend yield. True, that yield lags its peers by 150 basis points or more, but TransAlta's ROE is 25.3%, towering over the sector's 8.97%. Anchored by strong free cash flows, the company is aggressively buying back shares as institutional shareholders own 67% of this stock. Lower interest rates are a tailwind for the entire sector

Our PAST TOP PICK with TA is progressing well.  To remain disciplined, we recommend trailing up the stop (from $9.50) to $11.00 at this time.