The S&P 500 Index (SPX) continues to edge upwards in the month of October and is up over 22% for the year as of October 24.
With stocks at new highs, bargains are tougher to find for our portfolio. We continue to remain cautious and are keeping some powder dry, with a sizable amount of cash in the event that there is a market downturn.
My largest stock holdings at the time in the Covestor Event Driven Value Investments portfolio of writing are Dr. Pepper Snapple Group (NYSE: DPS) and Argan (AGX). I also recently purchased shares of Exelon (EXC).
Exelon is a high quality utility company with a traditional transmission and delivery business as well as a merchant generation business. The transmission and delivery business is a regulated monopoly and usually provides a stable source of earnings. The merchant generation earnings provide additional earnings depending on energy prices.
In my opinion, Exelon possibly has an advantage in its merchant generation business because it has the largest amount of nuclear power plants in the US. That gives the company economies of scale.
I believe Exelon should be able to earn around $3 per share with additional upside if energy prices, specifically natural gas prices, turn around and head upwards. Meanwhile, investors may get a nice 4% dividend yield while they wait.
The investments discussed are held in client accounts as of September 30, 2013. These investments may or may not be currently held in client accounts. The reader should not assume that any investments identified were or will be profitable or that any investment recommendations or investment decisions we make in the future will be profitable. Past performance does not guarantee future results.
