Market in Brief: 2010 Starts With a Take-No-Prisoner Mentality

General market conditions, profit taking and political uncertainty seemed to be the major drivers of January’s declines. The C Three Less Regulated Electric is more volatile than C Three’s other indices and generally moves in greater swings than the others.

Conversely, C Three’s Less Regulated Gas Index seems to have more resistance to downward pressures than the other indices.

Reliant Resources came in at the bottom, considered the weakest of the pure merchant electric plays. Allegheny Energy is having problems with its proposed transmission line J-V with AEP; PATH. Beleaguered PNM Resources is dealing with the potential municipalization of its Santa Fe service territory.
 
It did not seem to be particular events at individual companies; suddenly, the whole sector is out of favor. Only 10 of C Three’s index component companies were positive for January. February does not hold a lot of hope for a major turnaround with January’s downward trends continuing. It looks like many of the stocks are trading based on their bond ratings rather than expected future returns.
 
Less Regulated Electric Led Decline; Down More Than 6 Percent
For the past 12 months, only 17 of C Three index companies are in negative territory. The C Three Composite Index is up more than 10 percent for the past 12 months. Again, the Less Regulated Gas Index has outperformed the rest.
 
The five-year window is interesting. The Less Regulated Gas component has rebounded much stronger than the rest of C Three’s indices. The LDC or Local Distribution Company (natural gas distribution) has been the second-best performing index. One is considered relatively risky, while the other is considered a haven in risky times.
 
Methodology and Components of Each Index Tracked by The C Three Group
Less Regulated Electric Focus. More than 50 percent of revenues come from nonstate-regulated sources and/or more than 33 percent of assets are nonstate-regulated.
 
Less Regulated Gas Focus. More than 50 percent of revenues come from nonstate-regulated natural gas distribution and/or more than 33 percent of assets are nonstate-regulated.
 
Regulated Electric. No more than 20 percent of revenues can come from natural gas distribution and no more than 49 percent of revenues and 33 percent of assets can be associated with nonregulated activities.
 
LDC. No more than 20 percent of revenues can come from electric distribution or generation and no more than 50 percent of revenues and 33 percent of assets can be associated with nonregulated activities.
 
Regulated Electric and Gas Combination. More than 20 percent of revenues derived from natural gas distribution, no more than 50 percent of revenues and 33 percent of assets from nonregulated activities.
 

The C Three Index. The C Three Index is the nonweighted average of each of the companies included in the groupings above. The C Three Indices are developed based on a straightforward premise: If you invested $100 in each of the stocks of the companies we track, what would those shares be worth after a certain time? Historical share prices are adjusted for dividends, splits and spin-offs.

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Market in Brief: 2010 Starts With a Take-No-Prisoner Mentality

General market conditions, profit taking and political uncertainty seemed to be the major drivers of January’s declines. The C Three Less Regulated Electric is more volatile than C Three’s other indices and generally moves in greater swings than the others.

Conversely, C Three’s Less Regulated Gas Index seems to have more resistance to downward pressures than the other indices.

Reliant Resources came in at the bottom, considered the weakest of the pure merchant electric plays. Allegheny Energy is having problems with its proposed transmission line J-V with AEP; PATH. Beleaguered PNM Resources is dealing with the potential municipalization of its Santa Fe service territory.
 
It did not seem to be particular events at individual companies; suddenly, the whole sector is out of favor. Only 10 of C Three’s index component companies were positive for January. February does not hold a lot of hope for a major turnaround with January’s downward trends continuing. It looks like many of the stocks are trading based on their bond ratings rather than expected future returns.
 
Less Regulated Electric Led Decline; Down More Than 6 Percent
For the past 12 months, only 17 of C Three index companies are in negative territory. The C Three Composite Index is up more than 10 percent for the past 12 months. Again, the Less Regulated Gas Index has outperformed the rest.
 
The five-year window is interesting. The Less Regulated Gas component has rebounded much stronger than the rest of C Three’s indices. The LDC or Local Distribution Company (natural gas distribution) has been the second-best performing index. One is considered relatively risky, while the other is considered a haven in risky times.
 
Methodology and Components of Each Index Tracked by The C Three Group
Less Regulated Electric Focus. More than 50 percent of revenues come from nonstate-regulated sources and/or more than 33 percent of assets are nonstate-regulated.
 
Less Regulated Gas Focus. More than 50 percent of revenues come from nonstate-regulated natural gas distribution and/or more than 33 percent of assets are nonstate-regulated.
 
Regulated Electric. No more than 20 percent of revenues can come from natural gas distribution and no more than 49 percent of revenues and 33 percent of assets can be associated with nonregulated activities.
 
LDC. No more than 20 percent of revenues can come from electric distribution or generation and no more than 50 percent of revenues and 33 percent of assets can be associated with nonregulated activities.
 
Regulated Electric and Gas Combination. More than 20 percent of revenues derived from natural gas distribution, no more than 50 percent of revenues and 33 percent of assets from nonregulated activities.
 

The C Three Index. The C Three Index is the nonweighted average of each of the companies included in the groupings above. The C Three Indices are developed based on a straightforward premise: If you invested $100 in each of the stocks of the companies we track, what would those shares be worth after a certain time? Historical share prices are adjusted for dividends, splits and spin-offs.

Authors