BUY PNW @ $68.46

Buying PNW @ $68.46

2% position

PNW's main utility subsidiary, APS, had a rate case decision come out today and shares are down about 8% because the rate case was "value destructive" and "draconion" due to an allowed return of 8.7% vs. the historical average of ~10%-ish.

However, most analysts who use a cost of equity in their valuations would use something between 7-8%. So "value" can still be created with an allowed return of 8.7% and a cost of equity below that.

With PNW shares trading at ~14x next year's earnings, the stock is a total buy on this weakness - both on a relative and absolute basis. 

If ROEs come down across the country (as they should) PNW will not fall given it has taken the first step down. This would be a great pair trade against XLU too!