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Enron Mail |
-----Original Message----- From: "Russo, Brian" <Brian.Russo@ubsw.com<@ENRON On Behalf Of "Abramson, Barry" <Barry.Abramson@ubsw.com< Sent: Monday, November 19, 2001 7:13 AM To: undisclosed-recipients:;@ENRON Subject: Electric Utilities: Weekly Report KEY POINTS * We continue to recommend an overweighting in the electric utility group. The group's attractive relative P/E valuation, its high relative yield, its defensive nature and interest sensitivity are all reasons why we think electric stocks should perform well versus the overall stock market for the rest of 2001. * The average P/E ratio for the electric utility group is now 10.8x estimated 2002 EPS, compared with a 2002 P/E of 24.2x for the S&P 500. The relative P/E ratio of 0.45x is below the 25-year historic normal range of 0.60x-0.80x, and is also near the all-time low of 0.40x. * The average yield for the electric utility group is now 4.96%, which should make the group attractive to individual investors earning around 2.25% in the typical money market fund. Historically, the yield on utility stocks has rarely been more than twice as high as money market fund yields like it is today. * Falling oil and natural gas prices have caused wholesale power prices, that were already very low, to fall even further. Electricity futures prices, shown in Exhibit 2 on Page 5, fell by another 5% in most regions in the past week. Electricity futures prices have fallen by about 10% across the U.S. in the past month. * Coal prices have not come down in line with the big declines in the prices of oil, natural gas and wholesale power (see Page 8 for data on spot coal prices). The spot price of coal is more than 50% above the price levels from late last year in all coal markets. It appears that due to supply constraints, coal prices have not followed the decline in oil and natural gas prices. * Electric utility stocks lagged the overall stock market last week. For the five trading days last week, electric utility stocks went down in value by 3.7%, compared with a gain of 1.6% for the S&P 500. IPP stocks had a good week, with an average gain of 7.1%. * SPECIAL HOLIDAY TRIVIA QUIZ. This Thursday, Americans celebrate the Thanksgiving Day holiday. Can you name two nuclear power plants whose names remind you of Thanksgiving? (The answer is on the bottom of Page 4.) <<WKLY11119.doc<< - WKLY11119.doc Visit our website at http://www.ubswarburg.com This message contains confidential information and is intended only for the individual named. If you are not the named addressee you should not disseminate, distribute or copy this e-mail. Please notify the sender immediately by e-mail if you have received this e-mail by mistake and delete this e-mail from your system. E-mail transmission cannot be guaranteed to be secure or error-free as information could be intercepted, corrupted, lost, destroyed, arrive late or incomplete, or contain viruses. The sender therefore does not accept liability for any errors or omissions in the contents of this message which arise as a result of e-mail transmission. If verification is required please request a hard-copy version. This message is provided for informational purposes and should not be construed as a solicitation or offer to buy or sell any securities or related financial instruments.
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