When it comes to SCANA stock – sell, buy or hold pat?
Whatever you decide – and there are some 143 million SCANA shares outstanding – these are turbulent times for one of South Carolina’s largest publicly owned companies and its stockholders as the power company is buffeted by ever-worsening waves of bad news over its failed nuclear power plant project.
And with a federal grand jury investigation, a state criminal investigation, multiple ratepayer and shareholder lawsuits, advice for investors is all over the place.
“In whirlwind of activity, Scana remains a buying opportunity,” read a headline on a Morningstar analyst report that appeared late last week, a day before SCANA in heavy trading dipped to its lowest trading price of the year – in the $48 per share range, down from around $75 earlier in the year. That is a nearly $4 billion decline in the value of the company overall, from nearly $11 billion to about $7 billion.
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On Monday, SCANA stock continued trading in heavy volume – some 3.3 million shares were bought and sold, compared with its average of about 1.5 million shares daily – and closed at $48.58, a nearly three-year low and 8 cents higher than its Friday close. The Dow Jones Industrial Average, meanwhile, closed at a record high.
“We are reaffirming out $64 per share fair value estimate,” wrote Morningstar analyst Travis Miller, who on Monday maintained his opinion.
Meanwhile, the New York-headquartered Williams Capital Group, a national investment bank, downgraded SCANA to a “sell” and lowered its price target to $40 a share. The same day, Market Edge’s investment adviser urged, “Avoid the stock. ... If you are long, close position or monitor stock closely.”
And national brokerage firm Schwab is rating SCANA stock as a “D” – meaning an investor should consider “whether it is appropriate to continue to hold that stock in his or her portfolio.”
Many advisers are reluctant to give broad-brush guidance on whether to buy or sell.
“I don’t have any opinions as to where the stock is going to go. The operative word is uncertainty,” said Paul Patterson, an analyst at the New York City-based Glenrock Associates who specializes in utilities.
One unusual element of major uncertainty surrounding SCANA stock is the recent opinion by the office of S.C. Attorney General Alan Wilson that the 10-year-old law that allowed SCANA to go forward with charging ratepayers for building two nuclear reactors may be unconstitutional, Patterson said.
That law, the Base Load Review Act, allowed SCANA to tack on an extra monthly charge to its 700,000 customers to pay for building the the nuclear reactors, whose price tag rose to $14 billion before SCANA and its nuclear partner, Santee Cooper, announced on July 31 they were abandoning the project, Patterson said.
“If you pass legislation to encourage investment, and the investment doesn’t work out, you start to question the constitutionality of the law – and it’s 10 years later,” Patterson said. “You have to be kidding me!”
Around the Midlands, some wealth management counselors did not want to be quoted in a story about SCANA stock. Others avoided giving specific advice.
“The observation at this point for shareholders is that of great uncertainty,” said Heath Bartlett, of Lexington’s Calmwater Financial, which offers a range of investment and retirement counseling.
News stories have focused on SCANA the corporation, but his company has been fielding “a countless number of calls for weeks” from numerous employees and retirees worried about what to do and asking for guidance, Bartlett said.
“An analogy for them is that many investors feel they are driving down a highway which has become extremely foggy, and they can’t see into the fog or through it. But they have always counted on transparency and clarity and strong financials.”
Seeing SCANA’s stock in such uncertain times is troubling to many because people counted on its consistent stock and dividend growth, Bartlett said.
“SCANA has been a cornerstone to our state and nationally – a fantastic company for decades,” he said.
Bartlett said many SCANA stockholders are current and past employees, some with “thousands and thousands of shares,” he said. Under the company stock purchase plan, employees could use the dividends to regularly purchase more stock, he said.
Many employees also have, or had, a lot of stock in their 401K plans, Bartlett said.
Some SCANA employees with concentrations of company stock in their 401K plan have been selling the stock and putting it in other 401K funds or rolling assets from their 401K plan and rolling it over to an IRA to avoid taxation, he said. Some investors have held onto their SCANA stock for so long that they still have paper stock certificates, he said. In both cases, investors should talk with a financial expert before making deciding what to do.
Asked about SCANA employee and retiree stock holdings, SCANA said it has about 5,400 employees in its three states of operation – North and South Carolina, and Georgia.
As of June 30, about 8 percent of SCANA shares were held by SCANA employees, directors and retirees, the company said. That works out to about 11.4 million shares owned by employees, directors and retirees, worth a total of $553 million at Monday’s closing price of $48.58 a share.
A SCANA official said Monday the company has no immediate comment on its stocks’ prospects.
“We generally do not comment publicly on the performance of SCANA’s stock outside of our regularly scheduled earnings announcements,” spokesman Eric Boomhower said.