Exelon Energy’s bid to buy NRG Energy (including its highly profitable fleet of Houston-area power plants) met mixed reactions from analysts this past week.
Some thought it was a stretch, that the price offered for NRG was too low and that the Princeton, N.J.-based firm can wait for a better deal. Others thought the huge drop in NRG’s stock price in the last year (along with Exelon and every other power plant operator) made a buy-out by the bigger firm a sure-thing.
But while the success of the courtship is hard to predict, Motley Fool CAPS seem to indicate successful dating would lead to a happy marriage.
In a nutshell CAPS is a system that ranks stocks based on their potential to outperform the S&P 500. The stock ranking is determined by the stock picking prowess of some thousands of investors who take part in the program and are ranked by the popular Motley Fool investment advice site based on their success.
“CAPS stock ratings show you the best ideas from the best stock pickers, and the “best” are the one’s who’ve earned the right to be called so. They’re not just people with a Wall Street business card, or their own TV shows.
The Motley Fool data suggests that stocks with top CAPS ratings offer the best oppportunity to capture the best returns. A combination of two companies with high CAPS ratings “should bode well for the new firm’s future results, while a high-rated company that joins a lower-rated one may benefit one set of investors more than the other.”
So this piece from the Fools indicates that Exelon has a four-star rating and NRG a five-star.
Exelon was down $1.33, or 2.7 percent, to $48.55 Friday after reporting third-quarter earnings were off 10 percent due to bad debt collections and reserve payments related to the failure of Lehman Brothers.
In a note to investors John Kiani at Deutsche Bank in Houston said Exelon’s stock price performance in the near term “… will likely be more dependent on its ability to navigate its potential acquisition of NRG, performance of the [Independt Power Producers] and its long-term earnings upside.”
NRG reports earnings on Oct. 30. Earnings dates for other Houston power companies include Dynegy on Nov. 6 , Reliant Energy on Nov. 7 and Calpine on Nov. 7 (ok, Calpine splits its HQ between San Jose and Houston, but you know which office is more important).