Buy Algonquin Power on a pullback, this fund manager says

Over the years, Algonquin Power (Algonquin Power Stock Quote, Chart TSX:AQN) has been a gem of a stock to own, but with all the gains that the stock has made in recent months is there much upside left to 2019? Possibly, says Brian Acker, chief investment strategist at Acker Finley, who advises that waiting for a pullback is probably the best play.

“It’s right on our model price,” says Acker, president and CEO of Acker Finley, to BNN Bloomberg last Friday. “A good yield there at 4.83 per cent. And in a world where the Canadian market, a utility, telcos, the pipelines, etc., are all trading at substantial premiums over fair market value, this is actually trading at fair market value.”

AQN has had its ups and downs over the years since its public debut in 2009, including an overall flat 2018, but the renewable energy utility company has posted impressive numbers over the long run, gaining 380 per cent over the past ten years and currently sitting up almost 19 per cent year-to-date.

Algonquin made news earlier this month with its plans to purchase Bermuda Electric Light Company for US$365 million, a deal which AQN says is emblematic of its international growth strategy. The company’s latest earnings report came in May where AQN posted consensus misses on both revenue and EPS, coming in with a top line of $477.2 million in its first quarter fiscal 2019 compared to analysts’ estimate of $498
million and adjusted EPS of $0.19 per share compared to the expected $0.22 per share. (All figures in US dollars.)

Acker says that investors would be wise to wait on AQN.

“We have quite a bit of this for our clients who want fixed income and are looking for income at substantially lower prices,” Acker says. “Would I buy here? A little bit, but any sort of pullback, if we get a correction. If interest rates don’t go to zero, all of these stocks are going to correct, so I’d wait for that.” “I’d nibble a bit but I’d look for opportunities to buy more at a cheaper price,” he says.

More Cantech Cleantech