Even in a time of rising rates, utility stocks have their place in a portfolio, as a form of diversi...
The Power of the 21st Century
12/03/2015 9:00 am EST
New grid technologies will allow cities to save more money as they become more energy efficient and will enhance services and reduce costs for the utility companies providing the power, so Matt McCall, of Penn Financial Group, highlights one of his favorite stocks in the sector.
The terms “smart grid” and “smart cities” have been getting more buzz lately as the connectivity of everything and anything continues to expand. According to the Department of Energy, the US power grid blacks out more than any other developed nation. The aging of the power grid is forcing utilities and cities around the country to upgrade to the smart grid.
Not only is upgrading avoidable, it also offers benefits to the people that will be paying to move into the 21st century. The new grid technologies will allow cities to save more money as they become more energy efficient. It will also enhance services and reduce costs for the utility companies providing the power.
One of my favorite stocks in the sector is Silver Springs Networks (SSNI). The $700 million market cap company is one of the leaders in networking technologies that are helping modernize the US power grid into a smart grid. The company has delivered over 17.5 million devices along with their software and services to improve energy efficiency and management.
The company’s products will provide two-way communication from the device back to the utility companies. For example, the company can turn a water or electric meter into a smart meter that will connect wirelessly to the utility company and information can be shared between the device and the utilities. The constant communication is a win-win for all parties involved and the future of all smart monitoring.
From a financial perspective, the company is expected to be profitable this year as it is on pace to earn $0.06 per share. Next year earnings per share are predicted to increase to $0.26 before increasing to nearly $1.00 by 2019. The high growth of the bottom line makes the company an attractive investment opportunity for a portfolio that has a long-term outlook in a high-growth sector and stock.
The chart of the stock has been choppy, but is forming a bullish pattern over the last few months. There is significant resistance at the $15 area, but if the stock can breakout it would be a major buy signal. Recently the stock pulled back after failing at the $15 area and formed a bottom near $12.75 and is now starting to rally. There are a few ways to analyze the chart at this time, but initiating a small position today and adding if/when the stock breaks above $15 is the most prudent strategy.
Matt McCall, Founder and President, Penn Financial Group
Related Articles on UTILITIES
While utilities aren’t exactly known for their entrepreneurialism, regulators can prompt them ...
When Lynn Good took over as CEO of Duke Energy Corp. (DUK) in June 2013, the company was snared in r...
Founded in 1916 and headquartered in Charlotte, North Carolina, Duke Energy (DUK) has grown from a l...