Dealmaker’s Diary: This $20 Power Play Proves Smaller Can Be Stronger

Alpesh Patel|December 12, 2024

When most investors seek diversification, they look far and wide.

But what if staying close to home is the smarter play?

In this week’s Dealmaker’s Diary, I’m diving into a Midwest utility powerhouse that’s turned geographic limitation into a strategic advantage.

With a perfect mix of stability and growth potential, this energy provider has scored impressively on my Growth-Value-Income metrics.

The numbers tell an intriguing story about why narrow focus might be better than broad reach.

Check out my latest video to see why a “boring old” regional utility company has grabbed my attention.

This is the kind of research my clients pay thousands for… but you get it for FREE as a Total Wealth subscriber.

Click on the image below to dive in.

 

TRANSCRIPT

Hi, friends, and welcome to another Stock of the Week as part of my Dealmaker’s Diary.

And the grand reveal is Ameren (AEE). Let’s see what they do.

Well, it’s a utility holding company. You might think, “That’s a bit odd, Alpesh.”

Remember, it’s the numbers. Always look at the data.

It provides electricity and natural gas services to its customers in Missouri and Illinois. Now, we’ve gone all the way down to a very focused area compared to what I normally do, which is finding companies with global reach and diversification, but I’ve got good reasons for this one.

And in fact, by having that degree of focus, it is diversified compared to other companies because it is so focused.

It’s in the S&P 500, even though it’s focused so narrowly geographically. So it’s a major, important player.

Here’s why it came up on my radar… On my Growth-Value-Income ratings system – so relative valuation of the company, revenue growth, sales growth, cash flow growth of the company – it rates a 7 out of 10. This is my proprietary algorithm that measures the quality of a company in a quick measure.

Anything which is 7, 8, 9, or 10 gets a thumbs-up.

The forecast P/E is not necessarily cheap. That means you’re paying $20 for every forecasted dollar of profit, but it’s not ridiculously expensive either. I can live with that number.

Cash return on capital invested is negative. I always want it to be positive. But these are my Dealmaker’s Diary picks. I don’t necessarily have the same extremely stringent conditions that I have for my GVI Investor trading research service.

The Sortino is good number. That’s the average return versus downside risk.

Another number I can live with is the very low volatility. That gets two checks because I prefer lower volatility to high volatility.

Here’s what I’m looking at on the chart… A trend to continue forward and upward. A trend which started in the middle of this year and has significant momentum in its favor.

Now, the valuation, as I said, is a little bit pricey. And if you look at the discount cash flow, it’s pretty fairly valued at the moment. So it really is more of that momentum that I’m looking for, for it to continue onward on that.

That’s the play. That’s the angle. More than anything else, it is that side of things for me.

Thank you very much. I hope you enjoyed the insights on that.

I hope those of you who are part of my GVI Investor trading service have been enjoying the rides from my AI picks (stay tuned for quantum companies as well!)

But Ameren is a traditional utility… at the other end of the spectrum. With all of the AI excitement, we need some stability as well. This is where the stability comes in.

Thank you very much.