Algonquin Power is gaining traction, this investor says

Newhaven Asset Management CEO and portfolio manager Ryan Bushell said on BNN Bloomberg’s Market Call on Oct. 17 that Algonquin Power & Utilities (Algonquin Power Stock Quote, Chart, News, Analysts, Financials TSX:AQN) is starting to regain investor confidence after several difficult years marked by aggressive expansion, asset sales, and dividend cuts.

“It’s been a painful few years for them,” Bushell said. “The previous management team maybe took the company too far, too fast — too many things. They were forced to kind of recalibrate the company. They sold most of their renewable assets except for a very select few. And they endured two dividend cuts.”

Bushell said the company now has a leaner, more focused business profile. “What’s left is still a regulated utility company, especially now it’s more of a pure-play regulated utility,” he said. “It takes time to repair that confidence with investors, but it is trading at a pretty big discount to other utility peers, with reason. But I think that can be closed over time.”

He added that Algonquin’s smaller footprint could prove to be an advantage.

“You have the upside that this is a smaller, more nimble company,” Bushell said. “It’s almost 100% in the U.S. With the environment we see playing out there, we think there will be more opportunity for the company, either potentially as a takeout target, which would be our less favourite outcome, or just to grow organically and make some smart deals again.”

Bushell said he supports the new management team and sees improving sentiment in the market.

“We like the new management team,” he said. “We see upgrades coming across the Street. It appears that the investment community is starting to warm up to the story finally. This was very much out in the cold. But at these prices, with the dividend yield supporting it, I think you’re pretty well protected on the downside and maybe have a bit of base-metric upside relative to other companies in the sector.”

Of the analysts covering the stock, one rates it “Buy,” 10 “Hold,” and none “Sell,” with a consensus target price of $8.70.

Algonquin shares closed Oct. 22 at $8.35.

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