Put Some Hydro-Power In Your Portfolio

By Oxford Club Research Team | May 15, 2007

The ADR Alert
Tuesday, May 15, 2007
By Alexander Green, Investment Director

Email – #159

** Put Some Hydro-Power In Your Portfolio

Some investors view utilities as stodgy investments, conservative and boring.

Shareholders of Empresa Nacional de Electricidad (NYSE: EOC) know better. The company’s ADRs are up 66% over the last 52 weeks. And there is still plenty of trading potential here.

Empresa Nacional de Electricidad, better known as Endesa, manufactures and sells electricity in Chile, Argentina, Colombia, Brazil and Peru.

The company also provides engineering services. (In particular, Endesa is constructing the 2.5 kilometer El Melon Tunnelas, a major highway infrastructure project.)

But power production is the source of most of Endesa’s revenue. And with developing economies in South America growing at a rapid pace, the company is experiencing rising demand for energy.

Coal plants, of course, cause air pollution. And nuclear plants are politically unpopular, leaving shareholders worried about potential accidents and waste disposal problems. But Endesa operates mainly hydroelectric plants, which are humming due to several seasons of adequate rainfall.

This leaves Endesa free from the negative effects of rising oil, coal and uranium prices. And keeps profit margins high.

Endesa is also benefiting from increases in retail energy prices in South America.

Financially, the company is top-notch. Endesa’s operating margins top 38%. And with 32% quarterly revenue growth, profits are rising smartly, too. In the first quarter, earnings jumped 44.4%.

2007 will be a banner year for Endesa. And I expect the stock to trade substantially higher in the weeks ahead.

***Action to Take***

Buy Empresa Nacional de Electricidad (NYSE: EOC) at $48.25 or better. And place a sell stop at $40 for protection. There are no options on this one for speculators to consider.

Elsewhere in our ADR portfolio, we got earnings this morning from AerCap Holdings (NYSE: AER). Although the stock has been quiet lately, I suggested last week that first quarter earnings might be a barn burner. And they were . . .

Profits at the Dutch aircraft leasing company jumped 70%, smashing analysts’ estimates. Revenue climbed 123% to $309.5 million. The stock was up in pre-market trading this morning on heavy volume.

I see more upside ahead here. AerCap remains a buy.

If you have any questions, feel free to call one of our VIP Trading Services representatives at 888.570.9830 (toll-free) or e-mail: viptrader@oxfordclub.com , or contact Pillar One Advisor Greg Galloway or Rick Pfiefer at 800.438.3040 or 407.667.4729.

All ADR Alert recommendations will be posted on The Oxford Club’s website. Simply go to http://www.oxfordclub.com and click on “The ADR Alert.”

Stock

Country

Current Price

Comments

Endesa (NYSE: EOC)
Chile

New

Buy at $48.25 or better. Place sell stop at $40.

Mechel (NYSE: MTL)
Russia
$35.79
Buy. Sell stop is $28.

Elbit Systems (Nasdaq: ESLT)
Israel
$44.98
Buy. Sell stop is $38.50.

AerCap Holdings (NYSE: AER)
Netherlands
$30.30
Buy. Sell stop is $25.

Ctrip.com (Nasdaq: CTRP)
China
$72.10
Buy. Sell stop is $64.