Today, I bought the Shaw Group (SHAW, formerly SGR) at 28.20.
Shaw got slammed today by a triple team of two downgrades (to Neutral from Buy), a Nuclear Regulatory Commission report about a Westinghouse (of which SHAW owns a 20% stake) reactor saying it needed some more work, and pressure as the market reacted to GE’s and BAC’s unconvincing earnings reports. This morning, the stock was down almost 10%, and I saw that as a buying opportunity.
Despite the government standing in its way at every step, I feel the time is right for Nuclear. It is the only fuel source that can be effectively used in a large scale, for very few pennies per KWH, and emitting no greenhouse gases. Europeans, and the French in particular, have been using nuclear for decades, and get a significant amount of their electricity from uranium. While there are waste disposal issues, they are not insurmountable, and the plants have operated accident free. While many view Shaw’s minority stake in Westinghouse as a negative, I view it as a positive as it makes Shaw, which is primarily an infrastructure company, well positioned for when the Nuclear Regulatory Commission (NRC) begins issuing permits.
I will admit some luck in the timing of my purchase, as barely an hour after my purchase, Shaw issued a release concerning the NRC’s report on the Westinghouse reactor saying that the issues that were raised are surmountable, and they remain on schedule to have the first reactor installed and turned on by 2016. This caused their stock to rise by a percent and takes away a lot of the uncertainty that was swirling around.
The stock is priced at about a PE of 14 given analyst estimate of fiscal 2009 EPS of $2.00. This compares favorably with the PEs of their infrastructure peers like MDR (PE: 20), and nuclear peers like ES (PE: 26). During the times I have held the stock before, around $28 seems to be the sweet spot for accumulation, and the numbers corroborate that fact as I explained above. I will be holding the stock waiting for a price in the low-to-mid 30s, although should other news materialize I will of course adjust that target.
Shaw will report Q4 and Fiscal 2009 earnings at 5 pm EST on Thursday, October 29th. Analysts expect FY09 earnings of $2.00 and Q4 of $.47.
Disclosure: Long SHAW, no position in ES or MDR.