These energy stocks could power a portfolio
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Dear Mr. Berko:
I owned 200 shares of Washington Water Power 7 7/8 percent TOPrS Preferred Securities A. I bought them in early 2000. I know I did not sell them, but I cannot find them in my statements. The last I remember hearing from Washington Water Power was when Mutual of New York or the AXA Group bought out my brokerage firm, Advest. I can’t reach anyone at Advest, Mutual of New York or AXA who knows a darn thing about my stock. I’ve sent you the last Advest statement in which the shares appear, and I would appreciate your advice and help. I’m going to be 81 next month, and it would be a great birthday present for me if you could find them. I would also appreciate your opinion on Atlas Energy and NV Energy. I would like to buy 400 shares of each for income and growth. I’ve been managing my portfolio of $591,000 since I was 40, but it’s been getting more difficult for me to make investment decisions. It’s been especially difficult in the past two years as I saw my value crash from $850,000 in January 2007 when I moved my account to Schwab. My wife and I would appreciate your help.
D.N., Galesburg, Ill.
Dear D.N.:
Yep, at age 81 and after 41 years of managing your portfolio, I don’t doubt you are finding it increasingly difficult to make financial decisions. The enormous volume of new and confusing equities that clutter today’s investment landscape is so complex that sometimes you have to be a genius to avoid being stupid.
Frankly, I did not know Avista Corp. (AVA-$15.61) used to be the old Washington Water Power that provides electricity and gas to folks in Washington, northern Idaho and parts of Oregon. I have no idea why the company idiots changed the name to Avista. But your Washington Water Power Capital 1, 7 7/8 percent TOPrS, or Trust Originated Preferred Securities Series A, were called for redemption in April 2004. So, if you look at your last Advest statement, you will see that 200 shares of Avista were tendered in place of Washington Water Power. Perhaps it’s time to consider turning your portfolio responsibility over to a professional adviser.
NV Energy Inc. (NVE-$10.08), which used to be called Sierra Pacific Resources, sells power to eastern California and large parts of Nevada. It isn’t a company with much to brag about. Revenues should grow about 2 percent a year and, if net profit margins continue to improve, net income should grow from an anticipated 95 cents per share in 2009 to $1.20 by 2013.
According to Value Line, NVE’s dividend should increase 50 percent to 60 cents a share in that same time frame. Not bad, that! But an attractive peg on which to hang your hat is NVE’s book value. It’s rare to find a utility issue that trades below its book value, and NVE is one of the few.
The common stock trades at $10.08, which is more than 4 1/2 points less than the $13.70 book value. NVE yields a tad less than 4 percent, which is slightly below the industry average. However, I think NVE’s current share price, considering improved revenues, earnings and dividend, is about as low as it will go. So I believe that NVE’s total return potential over the next three to four years can be slightly above average. Some on Wall Street believe that NVE’s share price could move to the $12-$16 level in the coming three years. On a scale of 1 to 10, I rank NVE on the soft side of 7. So buy it.
Atlas Energy Resources LLP (ATN-$19.56) develops and produces oil and natural gas from oil shale properties in northern Michigan and Indiana. It also has operations in eastern Ohio, western Pennsylvania, Tennessee, New York and West Virginia. As of 2008, ATN had a working interest in 11,000 gas wells and proven reserves of more than 1 trillion cubic feet. ATN’s $2.44 per share dividend (ATN earned $2.12 per share) yields a darned attractive 12.5 percent, a large portion of which is considered return on capital and not taxable. I suspect ATN’s earnings might fall modestly this year due to lower energy prices, and there’s a possibility the dividend will also be reduced.
There are four analysts on the Street who follow Atlas closely. Each of them rates ATN a “strong buy.” Meanwhile, the stock trades more than a point below its $16.80 book value. Revenues in 2008 were $788 million, management produced a net profit margin of 18 percent plus a solid 14.2 percent return on equity. The stock trades at a low seven to eight times 2009 earnings. I have no problem if you take a small speculative position in this issue.
Please address your financial questions to Malcolm Berko, P.O. Box 1416, Boca Raton, Fla. 33429 or e-mail him at malber@comcast.net. © 2009 Creators Syndicate Inc.
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