By Nigam Arora & Dr. Natasha Arora
Please click here to see the chart of FirstEnergy (FE). Note the following:
- FE is long from an average price of 25.14. The stock is trading at $38.03 as o this writing. This represents a gain of 51%.
- You have also been getting a dividend of 4.15% while holding the stock. 51% gain does not include the dividends.
- Normally investors buy utility stocks just for dividends and capital appreciation is not easy to come by. The Arora Report subscribers have enjoyed significant capital gains on utility stocks over the years. A number of our utility picks have been bought out producing a fortune. The reason for the success is our method and intimate knowledge of the industry.
- The chart shows a significant drop in the price on the news of a corruption probe related to a nuclear plant that FE used to own. FE energy is an ex-client. We quickly understood that even in the likely worst case, the stock was likely to rebound as the consequences of the probe would not be material to the finances of the company.
- The chart shows the buy signal.
- The chart shows The Arora target zone. Now the stock is hitting the low band of the target zone.
- The chart shows the second target zone.
- The news is that Carl Icahn, an activist investor, has initiated a new stake in FirstEnergy.
- The risk in the stock is that FirstEnergy may do a secondary to raise cash.
- FE is exploring alternatives to raising cash by divesting some assets. If FirstEnergy is able to accomplish divestitures, the stock has a 70% probability of reaching the second target zone of $47.60 to $52.
- If the company is unsuccessful in divestitures and raises cash by doing a stock offering, the tentative plan is to buy the dip.
What To Do Now
Those in the stock may consider taking partial profits and continuing to hold the rest of the position.
Those not in the stock may consider buying on a dip in the zone of 🔒 (To see the locked content, please take a 30 day free trial).
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This post was just published on ZYX Buy Change Alert.
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Nigam Arora
Nigam Arora is known for his accurate stock market calls. Nigam is a distinguished master of the macro. He is a popular columnist with over 100 million page views, an engineer, and nuclear physicist by background. Nigam has founded two Inc. 500 fastest growing companies and has been involved in over 50 entrepreneurial ventures. He is the developer of Theory ZYX of Successful Change Management and is the author of the book on Theory ZYX, as well as the developer of the ZYX Change Method for Investing.
Dr. Natasha Arora
Dr. Natasha Arora has significant expertise in investment analysis especially biotech, healthcare, and technology. Natasha is a graduate of Harvard Medical School followed by a postdoc at MIT. She has published several peer reviewed research papers in top science journals.
