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What To Do When Stocks Hit Their Highs

By Roger S. Conrad, on Jul. 19, 2014


A dozen Conrad’s Utility Investor Portfolio stocks have hit new 52-week highs this month. And most of the other holdings are no more than a couple of good trading days from following suit.

That’s to be expected since the Dow Jones Utilities Average has surpassed its January 2008 high. The Alerian MLP Index regularly reaches new all-time highs. And our favorite water, telecom and Canadian energy stocks are rapidly heading in that direction.

It’s hard to believe that the conventional wisdom at the start of the year was that utilities were in a death spiral—and that rising interest rates and lost sales to solar would ensure they were among 2014’s worst performers.

Not all of last winter’s bears have been driven into hibernation. But analyst opinion has become more bullish for  dividend-paying stocks in general, and utilities in particular. Short sellers have been fleeced, as even lagging stocks have found their legs.

I strongly believe the 12 stocks in “Hitting New Highs” eventually will reach much loftier levels. All are well-positioned to grow earnings and dividends both reliably and robustly for years to come.

I’ve listed buy targets for these 12 stock picks in the table. See the Utility Report Card for my take on theses and all 205 companies I track in Conrad’s Utility Investor.

Also, three of the biggest winners have been turnaround stories: Entergy Corp (NYSE: ETR), Exelon Corp (NYSE: EXC) and Windstream Holdings (NSDQ: WIN). A good portion of their gains has come from returning to normal valuations. So long as their recovery continues, they’ll continue to reward us.

Unfortunately, nothing grows to the sky. And the steeper a stock’s upward trajectory—no matter how much value it holds—the more likely it will take a breather in the near term.

Interested in Big Yielding Telecom Stocks?

Learn more about Conrad’s Utility Investor and our over 200 stock picks in the “Utility Report Card” by clicking the link or image below. We’ve also included 2 completely free stock picks to get your portfolio started in this video.

These 2 Stocks are poised for big growth and big yields.


Don’t Overpay

The most important thing is not to chase any of these stocks above their buy targets. As of the close on June 20, that basically means going easy on all of them, with the exception of Exelon and Enbridge Energy Partners LP (NYSE: EEP).

As for the rest, patience could reward buyers with a lower entry point in the next several weeks.  

It’s always a good idea to think about taking some profits off the table in names that have run well past our buy targets. Not only does this approach turn some of your paper gains into a real profit, but it also gives you an opportunity to rebalance your portfolio and minimize the potential damage from a setback in a single stock. Model Portfolio stocks that still trade under our buy targets are the better place for fresh money.

I regard the stocks in my Conservative Income Portfolio and Top 10 DRIPs Portfolio as long-term holdings. Only rarely will I ever advise cashing out of these names completely–usually when a company’s underlying business deteriorates to the point that it can no longer create wealth for shareholders.

So far, that hasn’t happened to any of our stocks. I will sell an Aggressive Income Portfolio pick that rolls up a windfall profit in a relatively short period. That may take us out of some stocks early, but it will lock in gains–and history shows that riskier fare can be volatile, and go from black to red quickly.

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