Exelon Execution Wanes, France Telecom’s Delicious Opportunity

Three opportunities continue in the market, with little else looking particularly well priced for a value play of the kind that I seek out with high cash flow and something of a dividend to pay for your patience.  Exelon, France Telecom and Abbott Labs have all been acquisition targets, and if you bought them earlier you are seeing the float upward with the market right now, with a small spike for Exelon’s merger news.

Exelon announced this week that intends to acquire Constellation Energy.  I told you that their position as a top operator of nuclear power plants gives them a competitive edge along with their strong financial position. Constellation needs to get into nuclear, but lacks the chops to pull off a project.

Exelon will become the second biggest electrical conglomerate in the country with the merger.  Their debt will increase, probably pushing them into the BB range from BBB+, but in every other respect this will add hugely to their bottom line, and position them well to establish next generation nuclear power plants that meet the national energy blueprint.

We obtained the stock when the yield was between 5.8 and 5.5%.  Current price has it at 4.3%, which is still attractive. I would still say it is a buy, although I might only get a bit of it and wait for one of the many corrections that high oil prices and an over-valued market are going to drop on stocks in the coming year.

Right now there are fewer than 10 stocks that meet my value criteria on the market, and many of them are on the outer edge of their prime price. Only two are in the right range.  France Telecom (FTE) with a dividend of 6.3% is working out its many woes, but has $8.1B Euro  in free cash flows and affirmed a E$1.41 dividend.

I bought it when the dividend was bordering 8%, but at 6.3% it’s still a a heck of a deal.  FT had positive year-over-year numbers in most of its markets, and growth in all of its sectors. Broadband is the one area that lags.  The company and its productivity problems have been much of a cause celebre in the European media that is more soap opera than business issues.  A couple of despondent executives committed suicide, so FT’s transitional woes of absorbing huge European operations in Poland and in other countries developed that saucy edge for the press.

It’s one of the few I’d rate a good buy right now. The only other one is Abbott Laboratories (ABT). Drug stocks aren’t sexy right now, but in a correction of any larger implications, drugs will be a safe haven because they’re subsidized by the insurance companies and the government, and the looming baby boom retirees all need them.  They were a better deal back in February but they’re still priced to fair market value with a dividend around 3.48 that isn’t as good as it was but is still going to outpace inflation.

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