I have been reviewing my portfolio - as well as our "Team Alpha" retirement portfolio - during this lull in our overall strategy and am re-evaluating our position in Exelon (EXC), replacing it with Southern Company (SO).
Sometimes we need to face facts that we might be hesitant to face, and I simply cannot find enough good reasons to continue to hold EXC any longer since natural gas prices just keep dropping with no end in sight.
Yes we are getting paid to wait, but what exactly are we waiting for? EXC put a hold on some nuclear endeavors, the earnings were not great, and we just do not know how the Constellation (CEG) deal will pan out yet.
Trust me, I really hate dumping a stock that has not lost us money nor made us money, aside from the dividend; however, this is our business - to manage our portfolios to make the most that we can with the best companies we can find. That being said, while I think EXC will be in a trading range and will not fall off of a cliff, our money will be dead aside from the dividend and who knows how long the dividend will stay where it is.
Southern Company has a stellar track record of growth as well as paying dividends. They have paid them for over 60 consecutive years!
Last week the company announced that the Nuclear Regulatory Commission has given its stamp of approval on the very first 2 newest nuclear energy facilities since 1978 to none other than SO.
This is huge news, folks (read the entire report here). These 2 new plants will not only generate clean energy for a vast number of people, but will create in the neighborhood of 25,000 JOBS (on site, as well as peripheral) for the State of Georgia, where the plants will be located, not to mention the increased revenues and earnings for SO as well as the government monetary assistance that reduces SO's overall operating and startup costs. I see this being a tipping point for a slew of companies as well, but I will write about those in another article.
Chairman, CEO and President Thomas Fanning said in the report;
This is a monumental accomplishment for Southern Company, Georgia Power, our partners and the nuclear industry. We are committed to bringing these units online to deliver clean, safe and reliable energy to our customers. The project is on track, and our targets related to cost and schedule are achievable.
The Basic Fundamentals
Southern Company:
- Price $44.61/share
- Dividend Yield: 4.22%
- ESS Rating: Neutral
In April of 2009, the PPS was $28.88 and it has not looked back since then. We all know that share prices can go up, down and sideways but never the same way forever, so maybe there is a pullback in store.
I am not really concerned with that now. At the end of the year (2011) SO reported increases in revenues and earnings and while not blow-out amazing, with the 2 new plants on track to begin producing energy in 2016 and 2017, when do you think lots of other folks will jump on the SO band wagon? I can tell you one thing, they won't be waiting for 2015!
Not only that, we get paid to wait (4.22%). So my question is: Why not swap the EXC for SO now?
My Opinion
I read oodles of articles here and on lots of different sites and not that often do I find one that admits they made a mistake (well, maybe they massage the original opinion a bit) but I am stating it clearly right now: I made a mistake with Exelon. It is a very good company, and will be just dandy without us. I just should not have simply looked at the Constellation merger as the catalyst to drive the stock.
We are only human and we do the best we can. Now it's time to make a strategic move within my personal portfolio as well as the Team Alpha core portfolio we have been following here.
I will be selling EXC at the open Monday morning and using the proceeds to hopefully buy SO the same day.
I think we can all take some comfort with Southern Company.
Disclaimer: Please remember to do your own research prior to making any investment decisions. This article is not a recommendation to buy or sell any securities or stocks, and is the opinion of the author.
Disclosure: I am long EXC but am planning sell EXC and buy SO.
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