Investidea: WEC Energy Group, because stability

Инвестидея: WEC Energy Group, потому что stability

WEC Energy GroupWEC103.35 $BuyService in partnership with Tinkoff Investments. Quotes are updated every 15 minutes

Today we have a very speculative idea: take shares of the American housing and communal services enterprise WEC Energy Group (NYSE: WEC), in order to capitalize on the rebound of these stocks after a strong fall.

Growth potential and validity: 12% excluding dividends for 15 Months; 9% per annum during 10 years including dividends.

Why stocks can go up: because, as the hero of Mikhail Ulyanov said in the film "Antikiller", "Troubled times are coming, vague".

How do we act: you can take shares 103,2 $.

When creating the material, sources were used, inaccessible to users from the Russian Federation. We hope, Do you know, what to do.

No guarantees

Our reflections are based on the analysis of the company's business and the personal experience of our investors, but remember: not a fact, that the investment idea will work like this, as we expect. Everything, what we write, are forecasts and hypotheses, not a call to action. To rely on our reflections or not – it's up to you.

And what is there with the author's forecasts

Research, like this and this, talk about, that the accuracy of target price predictions is low. And that's ok: there are always too many surprises on the stock exchange and accurate forecasts are rarely realized. If the situation were reversed, then funds based on computer algorithms would show results better than people, but alas, they work worse.

So we're not trying to build complex models.. The profitability forecast in the article is the author's expectations. We specify this forecast for the landmark. As with the investment idea in general, readers decide for themselves, it is worth trusting the author and focusing on the forecast or not.

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Investment editorial office

What the company makes money on

WEC supplies electricity and gas. The company has a fairly detailed report.

Business broken down by energy type as a percentage of total energy supplied.

Generating capacity of the company itself — 68,8%. Types of fuel used as a percentage of total energy, of the supplied company:

  1. Coal - 35,5%.
  2. Gas - 25,4%.
  3. Renewable sources - 4,8%.
  4. Other sources of energy give.

Energy, purchased by the company from others, — 31,2%. Types of fuel used as a percentage of total energy, of the supplied company:

  1. Nuclear power - 19%.
  2. Gas - 1,9%.
  3. Renewable Energy - 1,9%.
  4. Non-commercial energy supplier - 8,3.
  5. The rest is given by other sources.
  China may prohibit IT organizations from conducting IPOs in the United States

The company operates only in the USA.

Инвестидея: WEC Energy Group, потому что stability

Arguments in favor of the company

Stability. Times are very turbulent now., and even, stable WEC business can attract many investors.

Electricity. Unlike similar NiSource, WEC approx 60% profit making on electricity. This eliminates the problem of a seasonal drop in gas demand in the summer, don't completely eliminate it.

Dividends. The company pays 2,91 $ per share per year, what gives 2,81% per annum. It's not crazy much., but more than twice the average for S&P 500. Combined with the thesis about stability, this can attract a lot of fans of passive income into stocks..

ESG. The company is aggressively developing the direction of clean energy: Planned, that by 2026 all its projects in this area will give 2,4 gigawatts. It is also working intensively to reduce emissions., energy efficiency and other projects, increasing environmental friendliness. The ESG lobby loves this and, maybe, will reward her with pumping quotes and facilitating access to loans.

Can buy. As in the case of NiSource, the indicated advantages of WEC can attract a buyer to it.

What can get in the way

Accounting. The company has almost 4.5 billion debts, of which 983.5 million it needs to repay within a year. The company has very little money, and they will not be enough to close urgent debts.

So that, probably, the volume of the company's debts will grow, which is very bad in light of raising rates, leading to an increase in the cost of loans.

In addition, the company is implementing a large-scale investment program to upgrade its infrastructure.. So dividends might cut and stocks might fall.

Don't expect much. The stability of the company's business has its downside: jumps in profits and revenues should not be expected here.

What's the bottom line?

Shares can be taken now by 103,2 $. And then there are two options.:

  1. wait 116 $. Think, we will reach this level in the next 15 Months;
  2. keep shares next 10 years.

It is worth keeping an eye on the news section on the company's website.. If dividends are cut, then you can have time to sell shares on the "SPb-Exchange" before that, how the American market will work out this information and quotes will fall.

However, until we can use our temporary advantage: "SPb-Birzha" so far starts working much later than usual. Will hope, everything will be back to normal soon.

  I wanted to know for a long time

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