Stock of the Week: Contact Energy Ltd

In this Stock of the Week I am going to look at the electricity generator and retailer Contact Energy Ltd [CEN.NZ]

The company has had short-term profit speed bumps, with another profit downgrade out today, but long-term the company will continue to grow its profit.

A part of a quadopoly, its generation assets alone should put it in anyone's bottom draw. Its attractiveness in today's turbulent stockmarket background made it one of my picks back at the end of last year and the solid nature of its profit, during an economic downturn and in better times should make it the backbone of anyone's portfolio.

There is another good reason to own the stock, especially if you have a short financial attention span. Origin Energy, Contact's majority owner, is likely to make another play at getting control of the whole company. Origin would have to pay close to double today's market capitalisation.

Beware though, there are drawbacks to owning shares in the company-the management, inside Contact and those that hold the purse strings at big daddy Origin are awful managers of this asset.

Yes a monkey could run an electricity company and that is exactly what you get with these guys but they will always make money under good and poor management.

Good luck!

Disclosure - looking at buying


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