3 Reasons to Sell Duke Energy Today

Acting on panic never helps investors, but it's still a good idea to question why you're really buying individual investments.

Consider integrated energy company Duke Energy (NYSE: DUK  ) . Though the energy and utility sectors have little risk of declining, you'll find a few of the 1,822 Motley Fool CAPS members weighing in on the company offer reasons to be bearish.

Here at The Motley Fool, we like to consider both the good and bad sides of an investment, so in this article, I'm highlighting three of the main bearish arguments on Duke Energy today. Be sure to read the bullish side as well, and then weigh in with your own comments below or rate Duke Energy in CAPS.                                            

1. A new normal?
Like Southern Co. (NYSE: SO  ) and other utilities, Duke Energy saw improvement in the second quarter with help from hot weather, while peers Xcel Energy (NYSE: XEL  ) and Exelon (NYSE: EXC  ) saw a pickup in some of their businesses. But the recovery hasn't been across the board, as Duke has seen signs of a slowing recovery and expects depressed power prices below prerecession levels for the next several years.

2. Competition
In Ohio, Duke has already seen some of its customers jump ship for lower rates from competitors, a situation that partially led Standard & Poor's to lower its outlook on the company. According to Janine Migden-Ostrander of the Ohio Consumers' Counsel, Duke's rates are the highest in the state where others such as FirstEnergy (NYSE: FE  ) and American Electric Power (NYSE: AEP  ) operate. With retail customer losses and margin pressure, Duke is considering selling off some assets in the region.

3. Regulatory threats
Some investors are concerned of potential tightening regulations that would require higher capital costs for some of Duke's coal-fired plants, which is a risk Blackstone is taking on in its purchase of Dynegy (NYSE: DYN  ) . The potential higher costs for Duke and lower power prices were behind $660 million in second-quarter charges and recently evoked a downgrade from one Citigroup analyst, and some CAPS members share similar concerns.

To see details of what CAPS members are saying now about Duke Energy, just click on over to Motley Fool CAPS and have a look -- or add your own thoughts directly to this story in the comments box below.

The Motley Fool Stock Advisor service looks for companies with strong management poised to beat the market over the long haul. To see all the stocks that have helped Tom and David Gardner beat the market by 72 points on average, take a free 30-day trial.

Fool contributor Dave Mock owns no shares of companies mentioned here. Exelon is an Inside Value pick. Duke Energy and Southern are Income Investor picks. The Fool owns shares of Exelon.

True to its name, The Motley Fool is made up of a motley assortment of writers and analysts, each with a unique perspective; sometimes we agree, sometimes we disagree, but we all believe in the power of learning from each other through our Foolish community. The Fool's disclosure policy wants an iPad for Christmas.


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