Starting a new role at a SM where I will be picking up power and utilities in addition to my core coverage. Buysiders & sellsiders who have been doing the space for a while, what is great about covering these businesses?
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It won't go bankrupt?
DicktheSellsider, is that you?
No
PG&E has entered the chat
Niche space where surprisingly few investors actually model the assets properly. Large, liquid capital structures with interesting trades to put on when names become special situations / file Ch11 overnight and get puked by traditional long only capital (e.g. PG&E, First Energy, TXU, Talen).
do you have any primers for covering the sector?
Also do you have any articles/reports on the interesting trades put on by funds?
One of the most interesting areas over next 10-30 years imo. Learn about energy transition and the change needed to get there
From the fact that this space may have been seen by the general investing public as “safe” or dividend-like stocks, i.e. during recessionary times or bear markets people tend to flock to utilities, now may be a good time to enter and potentially have those tailwinds at your back as a lot of market participants think we are either in a recession now and/or are likely to have one in 2023. Beyond that, now with more of the focus on green energy, new power/utility sources, and non-regulated utilities, there could be more upside to the sector even during bull market times as some names in the space are less tied to regulatory constraints on profit growth and have the ability to take market share and grow beyond the standard 2% or whatever the local utility regulatory board allows the old-line utility to grow at. I hope this helps. Good luck
It’s frankly not exciting at all and you won’t be pulling the double digit spreads that a TMT or consumer analyst will constantly generate. At least you won’t ever get fired for blowups but if you are basically giving up the upside optionality of HF you should be better off in MFPE.
Couldn't be more wrong. There are huge spreads in this space
Opportunity to be exposed to/learn about energy transition and emerging clean tech applications - e.g. implications of shifting from centralized to distributed (residential solar) energy models, energy storage, interplay of increasing EV adoptions + grid implications. A large set of private companies in the space that will start entering the public markets in the medium term. I think it will be fascinating.
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