Final to series of recommendations of Pat Dorsey are two utility companies. The Equity Research Director of Monringstar has not been very positive torwards utilities in the past few years, but now he considers there are bargains to be had in the sector.

The key to invest in this sector is realistic expectation. Dorsey thinks the sector can deliver high single digit return. He recommended two companies:

1. Westar Energy Inc. (WR)

Westar Energy provides electric utility services to customers in Kansas.. Westar Energy Inc. has a market cap of $2.39 billion; its shares were traded at around $21.88 with a P/E ratio of 15.63 and P/S ratio of 1.3. The dividend yield of Westar Energy Inc. stocks is 5.48%.

Dorsey thinks the company can grow 5-6% going forward, based on a good regulatory environment and good capital spending programs.

2. Exelon Corporation (EXC)

Exelon Corporation is a utility holding company. Its subsidiaries, Exelon Generation Company, LLC (Generation), Commonwealth Edison Company (ComEd) and PECO Energy Company (PECO), are engaged principally in the production, purchase, transmission, distribution and sale of electricity to residential, commercial, industrial and wholesale customers and the distribution and sale of natural gas to residential, commercial and industrial customers. Exelon Corp. has a market cap of $32.8 billion; its shares were traded at around $49.74 with a P/E ratio of 11.68 and P/S ratio of 1.74. The dividend yield of Exelon Corp. stocks is 4.22%. Exelon Corp. had an annual average earning growth of 8.8% over the past 10 years.

Dorsey likes the nuclear power generator. Nuclear electrical power compets with natural gas burning generated power. Right now, the stock is priced at a very low natural gas price. As the prices for natural gas rises, so will be the profit margin of the Exelon.

Watch Pat Dorsey discussing the stock ideas (Utility companies are at neat the end of the video)

The Strategy of Ben Graham – Warren Buffett’s Mentor

From 1923 to 1957 Warren Buffett’s mentor, Ben Graham, followed a strategy of investing in net-nets. He said: “It always seemed, and still seems ridiculously simple to say that if one can acquire a diversified group of common stocks at a price less than the...net current assets alone…the results should be quite satisfactory. They were so in our experience, for more than 30 years.”
Today net-nets are rare. They are collected under GuruFocus’ Net-Net Screener. GuruFocus also publishes a monthly newsletter which recommends the safest net-nets. All of these are included in GuruFocus Premium Membership.

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