Tag Archives: alt-investing

Exelon Should Be Considered For Income And Long-Term Growth

The company will benefit as the regulations are tightened to reduce the carbon emissions. Exelon’s robust capital spending plans will position the company well for future growth over the next 5-7 years. Merger with Pepco will result in immediate growth in earnings as well as cash flows. Exelon’s (NYSE: EXC ) competitive position has become less attractive following a crash in the natural gas and coal prices. This has resulted in lower earnings and dividends. However, Exelon may benefit in future when EPA (Environmental Protection Agency) will impose additional costs on thermal power plants. As Exelon is using nuclear power and abiding by the clean air rules, it will not have to face such higher fines and closure of its operations. The continued decline in solar energy prices will make it competitive with other natural resources (coal, oil and gas), in large parts of the world. As anticipated, solar prices will keep on falling in the future, this is a cause of concern for the utility companies solely focusing on fossil fuels for power generation. It is predicted that by the end of 2019, solar energy will be competitive and it will be able to compete with the other sources of electricity. Some of the smarter utilities such as NRG Energy (NYSE: NRG ), have already started to shift towards solar energy, and have also set up solar installation services in competition with SolarCity (NASDAQ: SCTY ) and Vivint Solar (NYSE: VSLR ). However, Exelon is relatively better placed than the others to survive this change. The company relies on nuclear energy, which is cleaner than coal or natural gas. Also, nuclear power is not very expensive, and can provide backup to disturbed wind and solar energy power. Conversely, Exelon faces operational and financial risks from its nuclear energy generation assets, such as strict environmental regulations by the government that will remain a threat to the company’s future financial performance. All these factors are out of control of the company and it cannot do much to control them. Also, any changes in demand or fuel prices may have an impact on the stock performance of the company. Moving forward, high bond yields are also a risk to Exelon stock price. As the 10 year bond yields have climbed up sharply, there is a huge pressure on EXC as government bonds become more attractive. This is a factor that should be considered by investors before making investment in the company. However, despite the fear of a rise in interest rates, EXC still remains attractive due to its dividend yield and company’s strong financial position. On the growth front, Exelon has plans to invest capital into regulated assets such as transmission and distribution of energy. However, it is shutting down 6 out of 11 nuclear plants due to their underperformance. It has also been invited to operate in the UK, which will boost its growth in the near future. To achieve the target of expansion, the company has allocated more than $5 billion for the current year. Exelon plans to achieve growth through acquisitions and investments in the utility industry. The recent acquisition of Pepco Holdings is an example of the strategy followed by the company. The merger will provide operational and financial synergies to the combined business. As a result, it will improve the post-acquisition earnings of Pepco-EXC, and also its cash flows for the years ahead. The combined business is expected to have a valuation of around $26 billion. Moreover, the earnings growth rate for the next 5 years is expected to be at 4.40%, which will have a good impact on the stock valuation of Exelon. The company is constantly improving its operational efficiency by improving the electricity generation capacity. The company will add more power generation plants to its portfolio by the end of 2018. However, the two new plants are expected to add 195 MW to its capacity. Furthermore, Exelon’s strong strategic growth initiatives and the management’s commitment to making healthy dividend payments make it an attractive pick for the long-term income investor looking at conservative growth. The stock offers a dividend yield of 3.70%, with dividends paid quarterly. The utilities solely reliant on fossil fuels might be at a risk as the regulations regarding lower carbon emissions and the rise of the renewable energy sources will take a toll on these companies. However, renewable energy will not be enough to meet the demand in the short-medium term (4-7 years). As Exelon is focused on clean nuclear energy, it will still play a big role, and in fact, it will benefit from the strict regulations for the utilities reliant on fossil fuels. The merger with Pepco will result in increased EPS and cash flows which should bode well for dividends. Also, Exelon has a robust capital investment plan for the next five years that will improve the company’s business risk profile and will result in stock valuation expansion. All of these factors make Exelon a safe and promising investment opportunity for income and growth investors. Disclosure: I am not a registered investment advisor and the views expressed in this article are my own. These views should not be taken as an investment advice or recommendation to buy or sell the shares. Investors should conduct their own due diligence before making an investment decision. Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More…) I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

3 Agricultural ETFs Rising On Wet Weather

After a rough patch over the last six months, thanks to a stronger dollar and accelerated crop plantation on a favorable weather outlook, agricultural ETFs seem to have turned the corner. Last week was great for the beaten down agro-based commodities, as worries over wet weather in America’s key growing belts led traders to bet on the contracts of several agricultural commodities. Almost all agro-based commodities added gains last week (as of June 26, 2015) and are likely to see more surges in the short term. Fears that led to this spike revolved around weather in the key grains growing states in the Midwest. Existing wet and cold weather and predictions for more rains are causing delay in the planting of this year’s crops by farmers. Some analysts have been pointing to El Nino for this wet weather condition in North America. In fact, Citigroup expects agro-based commodities to deliver as much as 25% gains this summer ( per Bloomberg ). Investors should note that El Niño, a warm-water phenomenon that blows up off the Pacific coast of South America, causes drought in some regions of the world and floods in others. Below we highlight a few agricultural exchange-traded products which have the potential to trounce the overall agro-based commodity space and offer investors some sweet returns from the wet weather despite the broad-based commodity market gloom on the dollar strength. Wheat Speculation of cold weather in the U.S. pushed the wheat prices to a 6-month high as such weather would curb production in the U.S. southern Great Plains . The area has already experienced massive rains that can even cause a flood. High levels of humidity go against crop quality, causing farmers to hold back the cropping. Due to this, wheat prices have also been soaring. Investors can easily play this trend via Teucrium Wheat ETF (NYSEARCA: WEAT ), a commodity product from the issuer Teucrium. This fund invests in wheat futures that are traded on the CBOT, but does it in a way that looks to lower contango issues. This $27.3 million wheat ETF was the top-performer last week, having returned over 12%. Corn Much like the wheat market, the price of corn is also rallying. Thunderstorms have already hurt budding corn crops in a few areas and now lower plantings will likely have an adverse effect on stock piles. Teucrium Corn ETF (NYSEARCA: CORN ) – a fund that provides investors direct exposure to the corn commodity – was up about 6% last week. The $82 million fund was otherwise down 21% in the last one-year period. Soybean Farmers are sowing soybeans at the most sluggish pace seen in 19 years, this time of the year . A delayed planting will result in a below-average yield, per the source. As a result, soybeans futures are seeing an uptrend. The $6.4 million Teucrium Soybean Fund (NYSEARCA: SOYB ), which looks to track the daily changes of a weighted average of the closing prices for three futures contracts for soybeans, was up 3.5% last week. Notably, the grain was at a five-year low level to start the month. Miscellaneous ETF Choices There are options for investors interested to play the above three commodities via a single product. To do this, investors should not tap the pure play choice; rather they should target a host of miscellaneous ETFs having exposure in the trio. MLCX Grains Index TR ETN (NYSEARCA: GRU ), DJ-UBS Grains Total Return Sub-Index ETN (NYSEARCA: JJG ) and DJ-UBS Agriculture Subindex Total Return ETN (NYSEARCA: JJA ) are some of the ETFs which are highly invested in the trio and accordingly shot up last week. GRU, JJG and JJA were up 12%, 9.6% and 7.3% respectively. Original Post

Examining Your Fund’s Puerto Rico Exposure

Summary Puerto Rico is scaring investors on fresh default concerns. High-yield municipal bonds are fluctuating on the heightened risks. Focus on three high-yield muni ETFs. By Todd Shriber & Tom Lydon Greece or Puerto Rico, investors have their pick of default poison, but investors in fixed-income, exchange-traded and mutual funds would do well to monitor goings-on in Puerto Rico because the U.S. territory’s imminent default could affect some well-known municipal bond funds. So dire is the situation in Puerto Rico, Gov. Alejandro García Padilla told the New York Times over the weekend that government finances there are “in a death spiral.” And $72 billion is not chump change. To put $72 billion into context with a catchy anecdote, that is more than twice the market capitalization of General Mills (NYSE: GIS ). Puerto Rico’s debt woes are important to fund investors because an “estimated in 2013 that as much of 80% of Puerto Rico’s debt has found its way into muni-bond funds, and 180 mutual funds in the United States and elsewhere have at least 5% of their portfolios in Puerto Rican bonds,” Alan Gomez reports for USA Today , citing Morningstar data. “Last week, the general obligation (GO) debt had plumbed new depths, helping to record a negative 5% month-to-date return for the S&P Municipal Bond Puerto Rico General Obligation Index. According to JR Rieger, global head of fixed income for S&P Dow Jones Indices, the facts are the situation isn’t looking good: the pending Puerto Rico Electric Power Authority July 1st default looms on the market, the possible restructuring of the Government Development Bank debt and the possible postponement of G.O. set – asides have sent alarms to G.O. bond holders,” said S&P Capital IQ in a new research note. The $1.6 billion Market Vectors High-Yield Municipal Index ETF (NYSEARCA: HYD ) lost 1.4% Monday . That ETF has a Puerto Rico weight of just 3.2%, making the territory the fund’s tenth-largest geographic weight. The $396.8 million SPDR Nuveen S&P High Yield Municipal Bond ETF (NYSEARCA: HYMB ) lost just 0.8% yesterday despite a Puerto Rico weight of over 13%, making the territory HYMB’s largest geographic weight. The shorter-duration Market Vectors Short High-Yield Municipal Index ETF (NYSEARCA: SHYD ) was unchanged Monday even with a 4.5% weight Puerto Rican munis. Some actively-managed mutual funds have significantly larger Puerto Rico exposure than the ETF rivals. “Oppenheimer Rochester Fund Municipals (MUTF: RMUNX ), an actively managed mutual fund has 77% of its assets in NY state bonds, but most of the rest of the assets is in Puerto Rico bonds. Similarly Oppenheimer Rochester New Jersey Municipal Fund (MUTF: ONJAX ) has 29% of assets in bonds issued by Puerto Rico, despite what some New Jersey residents might expect,” according to S&P Capital IQ. SPDR Nuveen S&P High-Yield Municipal Bond ETF (click to enlarge) Tom Lydon’s clients own shares of HYD. Disclosure: I am/we are long HYD. (More…) I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.