william hurley, cfa senior equity analyst
DESCRIPTION
Utilities Sector. Regulated and Integrated Electric Utilities Gas Pipelines and Gas Utilities. William Hurley, CFA Senior Equity Analyst. Utilities Sector Performance. Utilities have outperformed the broad index on a 3-year basis. Indexed Total Return (1 Year and 3 Years). - PowerPoint PPT PresentationTRANSCRIPT
© 2009 Northern Trust Corporation northerntrust.com
FALL FOCUS
2009
INVESTMENT CONFERENCE
William Hurley, CFASenior Equity Analyst
Utilities SectorRegulated and Integrated Electric UtilitiesGas Pipelines and Gas Utilities
2 2009 Fall FOCUS Investment Conference
Utilities Sector Performance
Utilities have outperformed the broad index on a 3-year basis.
Indexed Total Return(1 Year and 3 Years)
50%
60%
70%
80%
90%
100%
110%
9/30
/08
10/3
0/08
11/3
0/08
12/3
0/08
1/30
/09
2/28
/09
3/30
/09
4/30
/09
5/30
/09
6/30
/09
7/30
/09
8/30
/09
9/30
/09
S&P 500 Utilities S&P 500
50%
60%
70%
80%
90%
100%
110%
120%
130%
140%
9/29
/06
12/2
9/06
3/29
/07
6/29
/07
9/29
/07
12/2
9/07
3/29
/08
6/29
/08
9/29
/08
12/2
9/08
3/29
/09
6/29
/09
9/29
/09
S&P 500 Utilities S&P 500
3 2009 Fall FOCUS Investment Conference
Regulated Utilities Performance
The regulated utilities outperform in the first half of a recession.
Indexed Total Return(1 Year and 3 Years)
50%
60%
70%
80%
90%
100%
110%
12/3
1/07
1/31
/08
2/29
/08
3/31
/08
4/30
/08
5/31
/08
6/30
/08
7/31
/08
8/31
/08
9/30
/08
10/3
1/08
S&P 500 Regulated Utes
50%
60%
70%
80%
90%
100%
110%
10/3
1/08
11/3
0/08
12/3
1/08
1/31
/09
2/28
/09
3/31
/09
4/30
/09
5/31
/09
6/30
/09
7/31
/09
S&P 500 Regulated Utes
4 2009 Fall FOCUS Investment Conference
Regulated Utilities Dividend Yield
The regulated utilities historically have yielded 80 basis points less than the 10-year Treasury. Right now, at 5.9%, they yield 260 basis points more.
10-Year Treasury Yield Versus Regulated Average Dividend Yield
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%19
89
1991
1993
1995
1997
1999
2001
2003
2005
2007
US 10Y Ave. Reg. Ute
5 2009 Fall FOCUS Investment Conference
Integrated Utilities and Natural Gas Prices
The integrated utilities have been roughly correlated with natural gas prices.
Indexed Total Return(3 Years)
0%
50%
100%
150%
200%
250%
300%
Sep
-09
Aug
-09
Jul-0
9M
ay-0
9A
pr-0
9M
ar-0
9Ja
n-09
Dec
-08
Oct
-08
Sep
-08
Aug
-08
Jun-
08M
ay-0
8A
pr-0
8Fe
b-08
Jan-
08N
ov-0
7O
ct-0
7S
ep-0
7Ju
l-07
Jun-
07M
ay-0
7M
ar-0
7Fe
b-07
Dec
-06
Nov
-06
Oct
-06
0%
20%
40%
60%
80%
100%
120%
140%
160%Natural Gas (Rt. Axis) S&P 500 Integrated Utes
6 2009 Fall FOCUS Investment Conference
Regulated Electric Utilities PG&E (PCG) – 1/A
Southern (SO) – 2/A Duke (DUK) – 2/B
Regulated Gas / Pipeline Spectra (SE) – 1/B
Integrated Utilities Entergy (ETR) – 1/B Exelon (EXC) – 1/A FPL (FPL) – 1/A Dominion (D) – 2/B
Utilities Coverage and Themes
Coverage Dividend Yield
PCG; SO
Renewables FPL; PCG
Transmission PCG?; EXC? (Watch for note soon.)
Natural Gas Prices EXC; ETR; D; FPL
Carbon Legislation EXC; ETR; FPL; D
Natural Gas Infrastructure SE
Examples of Themes, Ordered by Exposure or Preference
© 2009 Northern Trust Corporation northerntrust.com
FALL FOCUS
2009
INVESTMENT CONFERENCE
William Hurley, CFASenior Equity Analyst
Alternative EnergySolar
8 2009 Fall FOCUS Investment Conference
Solar and Crude
The solar companies are less correlated with crude, as it should be.
0%
20%
40%
60%
80%
100%
120%
Sep
-09
Aug
-09
Jul-0
9
May
-09
Apr
-09
Mar
-09
Jan-
09
Dec
-08
Oct
-08
0%
20%
40%
60%
80%
100%
120%Crude FSLR SPWRA
9 2009 Fall FOCUS Investment Conference
Chinese Solar Versus First Solar
The Chinese companies have run on lower polysilicon prices; operating leverage.
0%
20%
40%
60%
80%
100%
120%10
/2/0
8
11/2
/08
12/2
/08
1/2/
09
2/2/
09
3/2/
09
4/2/
09
5/2/
09
6/2/
09
7/2/
09
8/2/
09
9/2/
09
10/2
/09
Index of Chinese Solar Cos. First Solar
© 2009 Northern Trust Corporation northerntrust.com
FALL FOCUS
2009
INVESTMENT CONFERENCE
William Hurley, CFASenior Equity Analyst
Thank you.