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Mostly our blogs are about stock picks with our asking for your assistance to do your own independent analysis..If you took our advise and invested in MIDD which we recommended on 2/23/09 in our blog-Mike’s largest investment in his portfolio–you saw a massive slaughter of earnings beat by 15 cents and a surge recently in the stock price when the market has been down..However,this article is about identifying when a company has gone sour for the investor due simply to the upper management putting their interest over stockholders..Since this happens all the time–I want to give you an example of this apparently happening right now..

NRG Energy is trying very hard to be driven by a hostile takeover by Exelon..NRG Energy decision to buy Reliant Energy’s Texas retail business with 287.5 million in cash leave analysts in a tailspin..They are thinking why is that deal better than the more creditworthy deal of a bid by Exelon..I will tell you like other analysts are thinking is that it isnt a better deal–executives at NRG are trying to keep their jobs over shareholder’s interest–a not good thing for investors.. This is in a sector that is given a great caviat for consolidation..Exelon’s takeover over acquiring Reliant Energy would give the company a geographical diversity,stable cash flow and a financial strong parent company according to Mark Williams, finance and economics professor at Boston University..Mr Williams likens this action to a hurricane like Katrina (this financial crises),and the acquiring of Reliant energy is like wanting to be in an NRG fishing boat pulling the Reliant dingy in this economical storm rather than an Exelon freighter..NRG is telling the business community Exelon is undervaluing NRG on the 2.6 billion bid with an all inclusive stock offer of NRG of .485 shares of Exelon for every shares of NRG share–this is equivalent of 26.43 NRG common share to Exelon’s 54.50 closing price on last October 17..I like other analysts dont think the offer isnt undervaluing NRG Energy ongoing business and assets..NRG’s share price has continually spiralled down since then to below 20 a share with worries of this economical tsunami plus the added costs possibly of a company due to carbon omissions that the OBAMA Administration may incur on such companies..

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If you want to know why many of these small to large-size utility companies are under performing the broader market lately is that many of those more than 250 companies are overburden with heavy debt loads according to Karl Miller,an industry consultant..These companies cant refinance and cash flow from operations are dropping..Many are absolutely forced to sell power and gas units to survive..NRG is supposedly not opposed to the offer by Exelon but wants a better price than their bid..This has brought attention that other future bidders of such other utility companies will be put on notice has that no group of utility companies can accept their values to drop very fast and hard–they will have to accept so offers in the future according to analysts..Mr Williams advised that the industry has to consolidate–that the industry is market driven not executive driven and the people with be left for toast..Exelon has gotten approval from from 51% outstanding shares of common stockholders of NRG which thus enabled it to extend its offer to June 26–while seeking regulatory approval..So shareholders of NRG are ready to move forward with or without the high paying executives..

Be very careful of these 250 plus small to large utility companies wholesale power generators–they have tremendous debt –many would be great diversification to stronger parent companies but many executives whom value their future jobs over such acquisitions over very good offer bids leave this industry a much scrutinized one..I believe many will have be acquired by larger ones to survive..Shareholder definitely would want this many times-hover management is overlooking such shareholders for their own interests..We want you to save your portfolio and such wholesale power generators are overladen with debt..Normal consolidation is being thwarted in such an environment by these executives..Sometime you have to say bye-bye executives and leave them to dry–many times they dont seem to be watching you as a stockholder of their company..

Mike currently owns MIDD shares while Rob currently doesnt..Neither one owns NRG Energy or Exelon shares at this current time.. Please do your own independent research before you make an investment purchase..See our disclaimer.

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