Sold Exelon

I sold Exelon at a loss. I took a harder look at the stock over the weekend and realized that I missed something. Namely, that free cash flow will fall off a cliff starting in 2010. I only buy into companies with strong free cash flow. I had assumed that because earnings and free cash flow were roughly equal for the past 5 years that would remain the case. I was mistaken and I should have noticed this earlier. I am taking my lumps.


Random Thoughts said...

EXC is at support, u think it will break down here?

Tsachy Mishal said...

My reason for selling was longer term.

Analysts did not like guidance for a silly reason. Analysts modeled earnings for 2010 to look like 2009 even though there were various one time factors in 2009. Namely, the coldest Summer on record so there was much less electricity use in the Summer and unplanned outages during the second half of the year. Therefore the second half of 2009 was abnormally weak. Analysts modeled a strong first half and weak second half for 2010, even though that is not how a normal year looks.