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Sunday, 10/10/2004

No Short Circuits Here
By Nich Sheldon
FE - FirstEnergy Corp

Company Description

FirstEnergy is a registered public utility holding company headquartered in Akron, Ohio. Its subsidiaries and affiliates are involved in the generation, transmission and distribution of electricity; marketing of natural gas; and energy management and other energy-related services.

[Source: Company Press Release]

Reasons to Invest:

This week's DOTW has nearly outperformed every single one of its competitors since August of last year. To date, the stock has gained more than 15 points over the past 14 months. A quick look at the Point-and-Figure chart and I note that the stock is currently on a Double-Top-Breakout pattern, of which has a bullish price objective (75.00) nearly 50% over its current price of 40.78. Furthermore, the stock has been trending through quite a nice regression channel, which has yet to test its bottom support bar for the entirety of its 13-month span.

Without further ado, this week's DOTW is FirstEnergy Corp (NYSE:FE). FirstEnergy Corp blew investors minds when they announced that their net income for the first six months of 2004 came in at $378 Million. I mean if you consider that this figure is up two times their last net income report of $124.7 Million, it's easy to see that FE is building a strong foundation of positive returns. The company cited higher margins and fewer operating costs as two of the contributing factors to their successful increase in net income. On top of that, revenues were bumped marginally higher (+4%) to $6.33 Billion.

On September Seventh, Site Selection Magazine named FirstEnergy Corp a leading utility for economic development for the third consecutive year. In order to be nominated for the award each company has to pass four categories; Capital Investment, Job Creation, Capital Investment Per Capita, and Jobs Per 10,000 population, as well as gauge the ability of the company "to complement power delivery with the powers of persuasion and innovation in fostering corporate investment in their service areas." Douglas Elliott, Senior VP of Customer Service for FE, noted that they were proud to be listed among Site Selection's top companies, as it showed that FirstEnergy's economic development efforts have helped to attract capital investment and new jobs over their three-state service area. "For 2003, our efforts, in cooperation with our state and local partners, helped attract almost $2 billion in capital investment and helped create almost 8,000 new jobs throughout Ohio, Pennsylvania and New Jersey."

On top of an already impressive first half of the year, FE's daily chart looks phenomenal. While I am upbeat on the long-term outlook for the stock, I would like to make sure that I make everyone aware of the fact that the stock is due for a little profit taking. The shorter-term outlook I have on FE is not quite the same as the longer-term outlook, but I suspect that given a few weeks to a month, we could see a beautiful entry- point take shape. As is, FE has been consolidating for nearly six weeks now. If one were to ask me what I think about FE's current trend I would say that the current trend sort of resembles the same trend that formulated in March (04) and ended in May.

With that said, I believe that we are going to see some major resistance tested over the next few weeks to months. However, I believe that with each failed test of resistance we will be given the opportunity to purchase shares at a lower premium, which in my opinion boosts the star rating that I have on this particular DRIP.

Ideally I would like to believe that the 100 DMA (39.26) will serve as strong support for the stock. I would like to see a pullback near this moving average, before I initiated the DRIP. This doesn't mean that I am not going to place my order for one share of FE now. After all, the sooner I have one share of FE in my hands, the sooner I will be able to initiate the plan once my conditions are met. By conditions, I mean my plan. As I have been saying to you over the past few articles, Plan your trade and trade you plan. Now hypothetically speaking, if FE does not find support at its 100-DMA, I am still comforted by the fact that the 200-DMA (39.26) is not too far below the 100-DMA, which should serve as a cushion to any downside surprise that may come the stocks way.

If my speculation is correct, we could see a bearish crossover on the MACD indicator on the Weekly chart in a week or two. The Stochastics indicator on the weekly chart is already edging from overbought territory to neutral territory, which should bode well for a relief rally come the middle of November, or the beginning of December. Like I said, once I see a strong bottom formed at the underlying moving averages or on the bottom bar of the regression channel, I am going to initiate the plan. Make sure that you look at the hypothetical Weekly DRIP Portfolio each week, as I will update you on the exact date that I initiated the FirstEnergy DRIP.

As far as dividends go, FE offers an annual dividend yield of 3.68%, which tallies out to an annual dividend of $1.50 per share owned, per year.

This ends another exciting episode of the DripAdvisor.com Drip of the Week. Stay tuned next week, as we will spotlight another stock worthy of the DripAdvisor.com limelight.

Remember:
Plan your trade, and trade your plan.

Until Next Week,
Nich Sheldon
Editor In Chief
www.dripadvisor.com
questions@DripAdvisor.com

Broker Recommendations

Strong Buy         3
Buy                3
Hold              10
Sell               0
Strong Sell        0

Brokers Covering  16


DRIP Information:
Shares to Qualify = 1
Auto-reinvestment = Yes
Accept Foreign Accounts: Yes
Temper Enrollment: Yes

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


Reinvestment Fees - 
Dividend investment fees: $0.09/Share
Cash investment fees: $0.09/Share
Auto reinvestment fees: $0.00


Transfer Agent:
FirstEnergy Corp. Investor
800-736-3402


Corporate Headquarters:
FirstEnergy Corp
76 South Main Street
Akron, OH 44308
Phone: (800) 736-3402
Fax: (330) 384-3772



 
 

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