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Author: aitraders Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 220  
Subject: Re: Someone REALLY does not like EXC ! Date: 6/29/2012 4:10 AM
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I have been reading these articles and it has definitely made me think. However, you are right to notice the cherry-picking of details to support the writer's thesis.

1st article - I have learned that anyone pretending to write objectively and yet inserts emotional or inflammatory perspective like "embarassed" or "Excelon's man" has a hidden agenda.

Ditto wth the second article.

Although, as you noted, the author does broach some valid concerns - performance to be watched - he also notably leaves out other perspectives.

Namely, the recession - housing, jobless rate, business activity - from 2008 to 2011 definitley affected performance. The situation will change and Excelon will benefit. Perhaps naively oversimplified for the more sophisticated investor but a simple truth nonetheless.

Natural Gas prices have hurt, but at some point this too will change, and Excelon will benefit.

The diversification into renewable energy projects is mandatory at this juncture in our culture. It is not necessarily a transparently good investment over a 6 - 24 month time frame, but it is equally clear that to remain viable and offer the potential for future growth (who knows when they will allow futher Nuclear plants to be built) it is mandatory that Excelon seek out reasonbale investments in other alternative energy sources. Wind, Solar, Hydro, Nuclear - I cannot say if their investments have been good ones, but the author also has no basis to claim that they are poor investments - yet. Only time will prove out this thesis. I find their efforts to be reasonable and appropriate.

One other thing I think I know - utilities are heavily regulated, which puts a cap on earnings power and pricing growth. However, on the other hand, the regulators are equally bound to ensure that the utilities earn enough margin to keep their businesses viable, which means during times of low or decreasing returns, I believe the utilities have the ability to seek recourse through applying for rate increases, which in turn also benefits the company in the short term time frame when business and volume resumes - at the higher rates.

Lastly, one thing I do watch, and like as part of my investment thesis in a nuclear generating company, is the company's efficiency ratio. I havent investigated thoroughly or extensively, but I would be willing to bet (which in essence I have with my investment) that Excelon is one of the highest performing and most efficient nuclear operator in the world, because I cannot imagine a sustained and continuos higher efficiency rating than they have received over the last many years.

I consider myself still a novice investor. However, Utilities have been a teacher's chalkboard instruction model since before Ben Graham. A ttm P/E of 12% and P/BV under 1.5 puts them in a general category of businesses selling at a fair price to being a value. Accdg to Yahoo, their payout ratio is 74% is high, but not prohibitively so. It accurately reflects their depressed earnings; howevever, should/when nat gas prices revert to new mean, their earnings can rise greater than dividend increases to mollify this ratio. Of course, the reason that utilities have been a model for so long is simply that before planes and cars and long after, the world and their computers cannot do without electricity. The sector has an unbreachable moat. Perhaps not the company, that is up for debate, but for my dollars, except for food and water, electricity generation is one of the surest sectors to invest in.

I use the 5% dividend as bond-like investment in a company with a moat and share price upside.

Lastly, and honestly yet perhaps cynically, would we want a huge nuclear generating utility that DIDNT have excellent, myriad and extensive political connections?

I am LTBH EXC barring a nuclear incident

aitraders
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