AYE is the utility holding company for Monongahela Power Co., The Potomac Edison Co., West Penn Power Co., Allegheny Generating Co. and others. For the FY ended 12/31/00, revenues rose 43% to $4.01B. Net income before extra. item rose 10% to $313.7M. Results reflect the acquisition of the assets of West Virginia Power and increased number of customers, partially offset by higher interest expenses due to increased LT debt outstanding.

February 22, 2001

Allegheny Energy Incorporated (AYE) provides its customers with electric generation and electric/natural gas delivery. The company also invests in and develops telecommunications and energy-related projects. Investing in utility companies generally requires a lot of patience, as profits are slowly accumulated over time. However, it seems this rule doesn’t apply to AYE shares, which have more than doubled over the last year. What’s more, we also like AYE as a split candidate. Currently, the company has 110.44 million shares outstanding and 260 million authorized, enough for a 2:1 stock split. Presently, shares have advanced nearly 20% over the last few weeks and could be gearing up for a break out rally. So, looking forward, we’ll look for initial resistance to arise at the all time high of $48.65. Advances through resistance, when combined with good volume of 670,000 shares or better will present us with our first potential entry point. Further opportunities will come when AYE shares advance through the $50 mark. As for support, we expect the $47 mark to be firm, bolstered by the 5-dma of $47.05. We’ll set our stops at $45.94.

Picked on February 22nd @ $48.22
Change since picked 0.00
Stop Loss @ $45.94

March 1, 2001

A state-by-state restructuring program in the power supply market could position Allegheny as one of the largest independent power producers in the country. As you can imagine, this has attracted plenty of attention from analysts, many of whom rate the stock as a "Buy." On Wednesday, the latest firm to jump on board was Friedman, Billings, Ramsey & Company. The firm initiated coverage of the stock with the aforementioned rating and set a 12-month price target of $60. However, the announcement did little to lift shares of AYE in trading, as the stock trended lower in the session, shaving $0.11 off its total. Still, the bigger picture remains in tact, as the stock continues to form a tight consolidation pattern on diminished volume, without breaking the upward trendline. In addition, the Stochastic looks to be rounding out and may be on the verge of issuing a buy signal. For now, we’ll wait to see if support holds at the $47 mark (recent top) and then at the 20-dma of $46.62. Resistance should come in at the all time high of $49. Low risk entry points may present themselves with a bounce off support on volume of at least 350,000 shares by mid-day or a move through resistance on similar mid-day volume. We’ll continue to keep stops at $45.94 to guard against lower levels.

Picked on February 22nd @ $48.22
Change since picked –0.88
Stop Loss @ $45.94

February 27, 2001

Demand for electric power is on the upswing in many parts of the east coast and Allegheny is looking to capitalize. Driven mainly by population growth, the energy supply in AYE’s service region has begun to dwindle. This has allowed the company to step in and grab more share of the market. Several acquisitions over the last 12 months have been accretive to the company’s earnings. Meanwhile, AYE fell slightly lower on the day, closing at $47.75. Volume was significantly weaker than the three-month average and came in at 396,400 shares traded. We like the fact that volume is remaining light through the short-term consolidation; however, it’s something that will likely need to improve if AYE to climb higher. Ideally, what we’d like to see AYE resume its upward momentum through the 5-dma ($47.83) and break above its all time high of $49.00, such a move could attract momentum traders to the stock. So, we’ll look for potential entry points when AYE breaks above $49 on good daily volume above the three-month average of 680,000 shares traded. Support resides at the 10-dma of $47.13. We’ll set our stops at $45.94 to guard against downside weakness.

Picked on February 22nd @ $48.22
Change since picked –0.47
Stop Loss @ $45.94

February 25, 2001

AYE has supplied investors with the best of both worlds over the last year. It has provided stable earnings with an amazing run up in stock price. This unique combination of safety and growth has made AYE shares a good alternative to the battered technology sector and investor’s have taken interest. So, how well has the stock performed? Try 100% over the past 12 months, which is in stark contrast to the NYSE Utility Index (NNA) return of –20% for the same period. As for our play, shares rallied to a new all time high of $48.95 on Friday, but were met with formidable resistance at this peak. The stock recovered from an intraday low of $46.38 to close at $47.40, down 1.70%. One reassuring factor about this decline was that it came on less than half the 3-month average volume. This indicates to us, at least on a short-term basis, that sellers do not yet have the upper hand. Additionally, the MACD remains positive and the OBV is still trending higher. With that said, we feel that the stock remains in good shape to potentially push higher in the upcoming week. So, we’ll continue to look for a break above the all time high ($48.95) to signal a good place to add shares. Upper opposition could then challenge us with a much tougher barrier at the $50 mark. Additional entry points will come when AYE shares move swiftly through these levels on good daily volume above the 3-month average of 675,000 shares. Support is at $46, bolstered by the 20-dma of $46.14. We’ll keep our stops firm at $45.94.

Picked on February 22nd @ $48.22
Change since picked –0.82
Stop Loss @ $45.94