SO - Southern Company: It's Almost Time To Buy This Proven 4%-Yielding Utility
2024-01-25 07:00:00 ET
Summary
- When buying utilities, I insist upon buying below fair value.
- Southern Company's revenue fell by double digits in the third quarter while adjusted diluted EPS surged higher.
- S&P rates the long-term debt of the electric and gas utility at BBB+ on a stable outlook.
- Shares of Southern could be 4% overvalued relative to fair value.
- Barring a significant change in fundamentals in either direction, I would upgrade the stock to a buy near $60.
My general investment philosophy is to buy quality businesses at or below fair value. Now, it's important to note that there are exceptions. Businesses like Visa ( V ) and Mastercard ( MA ) are two examples of companies that I don't mind "overpaying" for slightly. That's because these are extremely high-margin, high-growth businesses. It's my view that over 10 years or more, overpaying by 5% or 10% for these would probably be a rounding error relative to cumulative total returns....
Southern Company: It's Almost Time To Buy This Proven 4%-Yielding Utility