Whether it's the corporate lunchroom, your cubicle, or the local watering hole after work, there are regular places we gather to discuss news, sports or -- if you're like us -- stocks. Here at Motley Fool CAPS, we gather around the virtual water cooler daily to rate stocks and delve into their merits as investments.
In our 135,000-strong CAPS community, members give the thumbs-up or thumbs-down to about 5,300 stocks, seeking the businesses they think will outperform the market. Below, we'll take a look at some of CAPS' top stocks that are talked about the most and whether members think they'll continue their winning ways.
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Stock
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CAPS Rating (out of 5)
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Number of Calls
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% Outperform Calls
|
|
Duke Energy (NYSE: DUK )
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****
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1,687
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95%
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Foster Wheeler (Nasdaq: FWLT )
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*****
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1,740
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97%
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Frontline (NYSE: FRO )
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****
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1,656
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95%
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|
Gilead Sciences (Nasdaq: GILD )
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****
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1,688
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96%
|
|
Mechel (NYSE: MTL )
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*****
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1,657
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97%
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A tall drink of water
Set aside the need to upgrade the nation's power grid. Can the Smart Grid help utilities like Duke Energy and Pacific Gas & Electric become better businesses? Considering the amount of money they want to plunk down on the technology, they certainly seem to think so.
Pacific Gas is working with General Electric (NYSE: GE ) to distribute millions of smart meters to its customers so that they'll be better able to monitor and manage their energy consumption. Google is working with smart-meter maker Itron (Nasdaq: ITRI ) to distribute its PowerMeter software to achieve a similar goal.
Now Duke Energy will develop a smart grid power delivery system in Indiana so consumers can track their energy usage while the company improves the reliability of its system and more efficiently distributes electricity.
There's a certain amount of jumping on the bandwagon at work here. Smart Grid is a buzz phrase these days, but with the federal government having allocated $30 billion toward modernizing the electric grid, plenty of companies are willing to drop whatever else they're doing. Duke Energy will apply for some of that stimulus funding to help pay for the $445 million investment it's making. Just don't expect the payoff to be tomorrow. Duke Energy expects the project to take five to six years to complete.
Duke Energy would get a more immediate payoff if the massive energy tax making its way through Congress is implemented. They're not calling it a tax; instead they're calling it "cap-and-trade," but the effect will be the same: huge increases in the costs consumers pay for using energy. Even though Duke Energy CEO Jim Rogers admits it will raise costs by as much as 40% for some consumers, the utility is fully on board with the program. No wonder: Utilities won the lion's share of allowances worked into the bill.
We also have to reduce our reliance on fossil fuels. According to the Department of Energy, 85% of this country's energy needs comes from oil, coal, and similar carbon-based fuels. That means cap-and-trade will really be a tax on energy consumption.
At almost 16 times trailing earnings, Duke Energy's stock price is at a premium to that of all the other large-cap utilities out there, though it is more in line with forward-looking valuations. Cap-and-trade might end up eating into those earnings, whatever benefit the company might derive from plugging into the Smart Grid. CAPS All-Star danteps, however, thinks investors may soon look elsewhere because utilities might not be the haven they once were:
Generally speaking, utilities are over-valued on a relative basis versus the broader equity universe. This is a rotation play as investors seek higher returns in relatively undervalued equities with a potentially superior risk return profile. Although debate may reign with regards to the efficiency of markets, it seems reasonable that investors as a whole will seek to put capital allocated for equities into those segments with lower intrinsic values. Utilities have been a "safe" harbor during the recent economic storm, but soon investors may leave the safe harbor for other destinations.
Gather 'round
The CAPS community is like trying to take a sip from a fire hose. With so many good opinions about today's top companies, why not grab a pointy paper cup from the dispenser and join us at the Motley Fool CAPS water cooler, where your input can help guide other investors to stocks with bright prospects? Read a company's financial reports, scrutinize key data and charts, and examine the comments your fellow investors have made -- all from a stock's CAPS page.
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