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Friday, 09/05/2003

Up Above the Sky so High
By Nich Sheldon
CEG - Constellation Energy Group, Inc

Company Description

Constellation Energy Group (NYSE: CEG - News), a Fortune 500 company based in Baltimore, is the nation's leading competitive supplier of electricity to large commercial and industrial customers. It owns and operates a diversified fleet of power plants throughout the United States. Additionally, Constellation markets energy nationally and manages the associated risks, providing value-added services for its customers. The company also delivers electricity and natural gas through the Baltimore Gas and Electric Company (BGE), its regulated utility in Central Maryland. In 2002, the combined revenues of the integrated energy company totaled $4.7 billion.

[Source: Company Press Release]

Reasons to Invest:

Just a few weeks ago, Mars was the closest to Earth it has ever been in something like 59,000+ years. I think most of the world took the opportunity to look to the sky and appreciate this once in a lifetime opportunity. I went to a park that had one of the world's oldest telescopes and was awestruck at how bright the planet was.

Well, I started to think about constellations that were up in the sky and a different type of constellation came to mind. In fact, the constellation was up as well, only it was not amongst the sea of stars and planets in outer space. What came to mind was a stock that I had been following for quite some time now. The stock was Constellation Energy Group, Inc (NYSE:CEG). I contemplated spotlighting this stock in mid-July but hesitated because I found Intel (NASDAQ:INTC) looking like a more attractive candidate. So far these two stocks (CEG and INTC) have both performed at about the same intensity, and for this reason alone, we are going to make this stock our DRIP of the week.

If one were to look at CEG's chart they could easily see that the stock has been on a bullish leg higher over the past month or so. One might even start to wonder if the stock is overextended. It does appear to be a little overextended but the MACD continues to climb higher and is giving off a strong bullish signal. If a few bulls decide to sell off their stock in order to seek profits, this could provide a dip that would make CEG even more attractive at a lesser cost (just something to keep in mind).

Financially over the past six months, CEG's revenues have totaled $4.6 billion, which is up from $2.08 billion. You don't have to be a mathematician to see that that is nearly double the previous revenue announcement. Another reason that we like CEG is because they yield a hefty dividend of 2.8% and have an annual dividend of $1.04.

After doing a bit of research we believe that CEG could see the $41 level before year end and possibly be at its all time high of 52 and change by the end of next year. Of course this is the optimistic standpoint. We are optimistic on this stock because it has been over its simple 10-DMA and 50-DMA for more time than it has been under these moving averages. Right now the stock is using its simple 10-DMA as support and strength to go higher. If the 10-DMA is broken a test of the 50-DMA would be next.

For those pessimistic DRIP investors, we suppose that the stock could sink down to it's 200-DMA which is resting right over the 30 level but we suspect it would take some bad news and a few earnings warnings to do so. Not to mention, it has quite a few short-term support levels to break before it even reaches the 200-DMA. However, it is difficult to decipher which direction a stock is headed, and after years of practice all we can say is, nothing is a sure thing. Good luck.

Until Next Week,
Nich Sheldon

Broker Recommendations

Strong Buy         3
Buy                3
Hold               6
Sell               0
Strong Sell        2

Brokers Covering  14

DRIP Information:
Shares to Qualify = 1
Auto-reinvestment = No
Accept Foreign Accounts: Yes
Temper Enrollment:  Yes

Min/Max Investment = $25-$100,000/year

Reinvestment Fees - 
Dividend investment fees: 2.5c to 4c/share
Cash investment fees: 2.5c to 4c/share
Auto reinvestment fees: Not Available

Transfer Agent:
Constellation Energy Group

Corporate Headquarters:
750 E. Pratt Street
Baltimore, MD 21202 
Phone: (410) 234-5000


Copyright 2003

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