Filed Under: ,
Tickers in this Article: GE, D, EXC
With the dramatic rise in the spot price of uranium since 2005, uranium and nuclear power have come into a new era of public awareness.

Moreover, with global warming on the media "hot list" and nuclear power one of the only carbon-free energy sources, interest in nuclear energy will most likely grow in the years to come.

But the question for many investors is how to play nuclear power aside from specific uranium pure plays. And the answer is big utility conglomerates that have significant irons in the nuclear fire. It's important to remember though that many of these companies aren't really "growth plays" and are more focused toward the income investor. With this in mind, in this article, we'll look at one company that could be a great addition to conservative investor portfolios.

Big Dog
Nuclear enthusiasts certainly have many companies to look at, including General Electric (NYSE:GE) and Dominion Resources (NYSE:D).

However, one interesting choice that gives investors a significant exposure to nuclear markets is Exelon (NYSE:EXC), which is a utility services holding company with a $52.7 billion market cap.

Within the company is Exelon Nuclear, which supplies a massive chunk of the United States' nuclear power. According to the company website Exelon Nuclear operates the largest nuclear fleet in the U.S. and the third-largest fleet in the world. It has 10 stations and 17 reactors, representing approximately 20% of the U.S. nuclear industry's power capacity. What we're talking about here is a Goliath in the nuclear power arena, and a company that's also diversified in hydro and fossil fuels.

Recently, the company announced fiscal 2008 profit outlook of $4.00 to $4.40 per share. While the estimate fell a little short of the $4.61 per share that the analysts polled by Thomson Financial estimated, the news certainly wasn't bad. Especially when we consider the company's board approved a share buyback of $1.25 billion in August. If the company is buying shares, perhaps the market should be too.


Insider Selling A Bad Omen?

One troublesome area is recent selling by executives. In early November, Ian McLean, an executive vice president with the company, exercised options to sell 8,750 shares of common stock and then sold them all for $82.59. Also in November, CEO John Rowe exercised an option for 50,000 shares and then sold them all for $82.39 to $84.28 apiece. The sale was part of a pre-arranged 10b5-1 trading plan, but at the end of the day, the CEO did sell shares.

When executives are selling stock, it certainly gives us good reason to raise an eyebrow. Given that the stock is up over 100% in the last three years, it would be a good idea to proceed with caution. However, the fundamentals remain solid. For example, the company is paying out a 2.2% dividend yield of $1.76. (For both sides of this debate, see Insider Selling Isn't Always A Bad Sign and Delving Into Insider Investments.)

When all the dust settles, it's probably time for a pull back in the stock, just to ensure it remains healthy in Wall Street's eyes. However, should the stock fall back into the 200 day moving average near the $72 area, many income investors (including funds) would likely use the event to instate additional positions.

Bottom Line
Overall, Exelon is a great way for investors to play nuclear power though a big conglomerate. Savvy investors may want to sit on the sidelines for a few, just to see if they can get a better price.

To learn more, see Conglomerates: Cash Cows Or Corporate Chaos?

Looking to cook up a market-stomping stock portfolio? Check out our FREE report "7 Ingredients to Market Beating Stocks" and get started right now!

comments powered by Disqus

Trading Center