VK (vkaminski@aol.com) sent you this article from money.com.

=====
These five electric utilities are undervalued and under-appreciated
by analysts. But they offer superior long-term returns.

http://www.money.com/money/depts/investing/sivy/archive/010518u.html
Click the above URL to read the HTML version of this story

By Michael Sivy

The United States is experiencing a small-scale energy crisis, with
soaring oil prices and shortages of electricity on the West Coast.
The prospect of urgent exploration has boosted the shares of oil and
gas producers, as well as the stocks of oil-service companies.
Similarly, the shares of companies that build electrical generating
plants and oil refineries have also been strong (I recently featured
Fluor, one of those companies -- see
" Construction project ").

But other sectors -- including electric utilities -- have been hurt
by all the energy turmoil. At the simplest level, many electric
companies rely on oil and gas for fuel. But they have also suffered
from fears that the West Coast power shortages could spread to other
parts of the country. In fact, the Dow Jones Utilities index is down
slightly since April, even though the Dow Industrials are up more
than 15 percent.

Nonetheless, electric companies remain a worthwhile choice for many
investors. Including utilities in a portfolio of growth stocks
reduces volatility. Conservative investors will also appreciate the
income that utilities provide -- and the benefits of rising
dividends. When you buy a bond or a preferred stock, you lock in a
certain level of return. But most electric utilities offer dividend
growth -- even 5 percent and 6 percent a year will keep you ahead of
inflation and eventually outpace the return on bonds (see
" Selecting
stocks for income ").

One of my top utility picks over the past year has been
 Duke Energy ,
an electric company based in the Carolinas. In addition to
having a well-run local business, Duke has profited enormously
because one of its subsidiaries provides power to the California
market where electricity prices are soaring. As a result, the stock
has gained more than 50 percent since I first recommended it last
summer. I still think Duke has attractive long-term prospects, but
obviously it's not as good a buy as it was a year ago.

Where are today's best values in the electric utility sector? For the
answer, I turned to the Leuthold Group, a value-oriented investment
advisory firm in Minneapolis that regularly does a quantitative
screen for stocks that are undervalued because they are out of favor.
Of the 53 stocks the most recent screen identified, 10 are electric
utilities. Of those, I've winnowed out five that have solid finances
and offer projected earnings growth of 5 percent or more over the
next five years. In addition, these electric companies have modest
P/Es, based on this year's estimated results.

The five include
 DTE Energy
at $44.70 a share. The parent
company for Detroit Edison is in the process of acquiring MCN Energy,
a Michigan gas company, which could boost the combined firms'
long-term earnings growth. In the meantime, DTE pays a 4.6 percent
yield and trades at a 12.5 P/E.
 FirstEnergy ,
the holding company
for Ohio Edison, is in the middle of a complicated attempt to acquire
GPU, and uncertainty about the deal has depressed the stock. Whether
it goes through or not, at $29.90 a share, FirstEnergy offers a 5.1
percent yield and a 10.5 P/E.

 OGE Energy
is the holding company for Oklahoma Gas & Electric.
At $22, the stock offers a 6 percent yield and an 11.7 P/E.
 Pinnacle West Capital ,
parent of Arizona Public Service is expanding its
generating capacity in the Southwest. At $49.50 a share, this
growth-oriented utility pays a 3 percent yield and trades at a 13 P/E. Finally,
 Potomac Electric
supplies power to Washington
D.C. and the surrounding area. The company is acquiring the Delaware
utility Connectiv, in a move that should enhance long-term returns.
At $22.30 a share, Potomac Electric carries a 4.4 percent yield and
an 11.9 P/E and should grow as long as Washington keeps expanding.

Originating IP address: 152.163.207.213