AES PROFILE:
The AES Corporation operates as a global power company. The company owns and operates two businesses, Generation and Utilities. The Generation business owns and/or operates power plants to generate and sell power to wholesale customers, such as utilities and other intermediaries. It generates electricity through various sources, which include coal, gas, hydroelectric, biomass, wind, and solar energy. The Utilities business owns and/or operates utilities to distribute, transmit, and sell electricity to end-user customers in the residential, commercial, industrial, and governmental sectors. The AES Corporation’s portfolio of electricity generation and distribution facilities can generate 40,300 megawatts and its distribution networks serve approximately 11 million people in 29 countries. The company was founded in 1981 and is based in Arlington, Virginia.
OTHER NOTABLE AES TIDBITS:
Index Membership: Dow Jones Composite, Dow Utilites, S&P 500, S&P 1500 Super Comp
Sector: Utilities
Industry: Electric Utilities
Price/Sales Ratio: 0.57
Beta: 1.43
COMPANY INVEST TECHNICAL TAKE:
At just over $12 a share, AES is a share price the average investor can afford, which is always one of our criteria in selecting stocks to buy.
The chart favors AES for a mid to longer term play for a number of reasons:
A slow stochastic “A” reading above 50 is bullish, and AES has certainly been bullish over the last 3 sessions. However, that bullishness has caused the stochastic indicator to quickly reach the overbought level. That simply means you may want to open a smaller position here and add to that position on a pullback, essentially “buying the dip.” The other indicators we will discuss indicate a sustained uptrend in AES, so an overbought stochastic reading here is not that concerning.
”B” is the daily candlestick price chart for AES. The chart shows AES was a Jekyll and Hyde stock in 2010, with a prolonged selloff for the first half of the year followed by a nice uptrend in the past six months. Notice how the stock bottomed at the beginning of July. Now look at the stochastic indicator and compare prices each of the three times the stochastic pulled back to the 20 area. The stock price made a higher-low each time, validating the uptrend.
I’ve use the 12 and 22 period Exponential Moving Averages (EMAs) with this chart. 12 and 22 period average crossovers generate good medium length trades (from a few weeks to a few months in duration). Look at the wonderful buy and sell signals generated when the 12 EMA crosses the 22 EMA. As of today, there has been another EMA 12/22 cross which is a powerful buy signal.
The MACD indicator “C” is above the zero line (very bullish) and rising, with no signs of a bearish signal line (black) and MACD line (red) crossover.
The final indicator we looked at is the ADX indicator “D“. We look for the +DI line (green) to cross up through the –DI line (red) for buy signals. More importantly, we mark the high price on the day of the DI crossing. When the price of the stock closes above that high price, the buy signal is confirmed. That confirmation occurred yesterday.
Bottom Line: AES could be a wonderful trade. Its price to sales ratio of 0.57 is well below its main competitors, making AES a great value stock. Also, with a beta of 1.43, the stock has enough volatility to produce a nice return in a short period of time. Buy a little here, or wait for the first sizeable pullback to get in or add to your initial position with a stop at $10.97.
