Brook Reef

Adding 2% more to EIX @ $55.78 4% position @ $56.93 The California utilities sold off hard yesterday - likely on fears of a bad wildfire season. Or a big fund is liquidating their positions. Either way, there's nothing new here. I knew wilfire season is the biggest risk and nothing was reported yesterday to increase this season's risk. That's a formula to add to a position. (I'm not adding to PCG just yet - being 8% in California utilities here is a bit too concentrated.) If there's more weakness in the coming days/weeks, I'll keep buying.

Shorting T @ $30.05 4% position I'm getting a bit too long for my liking - even though it's utilities, it still makes me sweat - so I'm shorting a sizeable position in AT&T following their dividend cut hiding inside of a merger/spinoff.  AT&T was one of the first stocks I ever bought and has been basically this price for as long as I've followed it. Not impressive. Management is pretty bad - takes on crippling amounts of debt and now ends the company's dividend growth streak by hiding the dividend cut inside of this transaction. After rallying the day after the deal, T hasn't moved since. So investors aren't seeing the upside from the deal. Plus, there will be selling pressure from dividend growth investors as the shares are removed from the various dividend ETFs. As a theme, I see the market as extremely overvalued and have trouble finding reasonable values outside of utilities.

Buying EIX @ $58.08 2% position EIX, like PCG, is a California utility that has been hurt by wildfire costs in recent years. That risk, blame, and cost pressure, has pushed these utilities to huge discounts relative to the utilities group. EIX trades at less than 15x P/E and yields 4.5%! I'll take a position in EIX, the creme de la creme from a few years ago, and ride it to at least an industry-average P/E! EIX has no gas utility exposure, has been focused on getting ready for the electrification of everything since I've known them (~2011), and is generally an amazing company. They are one of the top 5 beneficiaries of extreme electrification - for transportation, industrial, and other uses.  This is quickly becoming a top idea and one that I'll try to be patient with - and only trade around the margins once I build a larger position.

Closing this pair trade of: LONG HTL & H SHORT MCD & KR Long Cost Basis Sell % Gain/Loss Short Cost Basis Cover % Gain/Loss HLT 120.66 122.97 1.91% MCD 229.91 231.28 0.60% H 76.64 78.6 2.56% KR 36.81 37.13 0.87% 2.24% 0.73% TOTAL GAIN/LOSS 1.48% This trade will likely keep working - but I'll take my "dirty day trader" gift and move on after making my 1.0%+ in a day. I didn't know the mask mandate from the CDC would be removed - which helps travel.  This trade could turn into a 5-10% profit in a few weeks - but I've learned to take the money and run sometimes. And this "feels like" one of those times. Hunting for new bargains once again.

Pair Trade! Buying HLT & H - 4% positions each Shorting MCD & KR - 4% positions each Long Cost Basis Sell % Gain/Loss Short Cost Basis Cover % Gain/Loss HLT 120.66 120.66 0.00% MCD 229.91 229.91 0.00% H 76.64 76.64 0.00% KR 36.81 36.81 0.00% 0.00% 0.00% TOTAL GAIN/LOSS 0.00% Thinking of a good pair trade here with inflation and economic boom happening. This seems like a pretty fun trade - to hold for a few days to a week. Long hotels - they have pricing power and fixed costs. Demand is shooting higher this summer as more people get vaccinated and want to travel. It's almost a long idea itself - perhaps it will be. Short MCD & KR - neither has much pricing power. Costs are both fixed and highly variable. But raising prices is difficult for both. And demand has already been crazy high and is likely to flatten or decline. I may not want to be short these in a sharply rising market, but with a pair it's not so bad. I really enjoy pair trades. In all market environments.

Selling AGR @ $52.05 Realized gain of $1.26 (2.48%) Taking a small gain on AGR for a variety of reasons.  We're at the point in their merger with PNM where bad news is most likely and hiccups to the approval will come up. There have already been rumblings. Regulators in AGR's home districts in the northeast have been tightening their allowed returns and fining utilities. Bad news. And general ideas that utilities underperform in inflationary environments - especially where returns are low and being lowered and some savings will be given away in the merger approval in New Mexico.  For those reasons, I'm out...for now.

Buying PCG @ $10.56 2% position PCG gives you cover in a weak market - they trade at about 1/2 of the average utility P/E. There is a TON of risk in the name. Undoubtedly. Wildfire, fines, more explosions, mis-reporting and faking of pole inspections.  But they recently hired a killer CEO, Patti Poppe, and she's there to fix the thing. And isn't afraid to take short-term pain for long-term gain. She came from CMS - a utility that trades at a premium to the broad group. She's a focused, no-nonsense leader who will come in and get the job done. I'll start building up a position into the broad market weakness - with valuation as a cushion and knowing there could and will be landmines along the way.