Electric utility stocks bottomed out in 1999. It's up to managers to lead a rally.
The allure of technology stocks and rising interest rates combined to make 1999 the worst year for electric utility stocks since 1974, according to market analysts. But they see upside potential in the under-performance of these stocks, and say utility managers can play a role in attracting investors.
"I think what the utilities need to do is make a little more noise about how cheap their stocks are, and they should step up their investor relations efforts and do more visits directly to institutional investors," says Barry Abramson, CFA, managing director, electric utilities, at PaineWebber Equity Research. "It's up to them to make the effort, but we think the effort would pay off."
"People view the tech sector as essentially riskless, all it can do is go up, and we know that's not true," adds David E. Parker, senior vice president of research at investment firm Robert W. Baird & Co. Inc.
He agrees that utilities need to be more active in promoting themselves to investors. "I think investors are waiting for some good new ideas from utility managements, and I'll tell you that I'm a little frustrated that we're not seeing a lot in terms of market innovation."
Says Parker, "Growth rates are increasing now and capacity shortages are there so you have supply and demand working in our favor. I think the ball, to a degree, is in the utility manager's court now. I think they've got to start proving they can surprise on the upside and not necessarily always be pointing fingers at everyone else about why innovation won't work."