AES’s rally this year
AES (AES) has rallied more than 30% since the beginning of 2016. No other US competitive utility holding company has soared that much in the same period.
As of August 23, 2016, AES was trading near the same level as its 50-day moving average. AES stock breaking below its 50-day moving average could be an indication of a trend reversal. On a positive note, it’s still trading at a 12% premium to its 200-day moving average.
Relative strength index
As of August 23, 2016, AES’s RSI (relative strength index) was 49. RSI is a momentum indicator made up of values between 0 and 100. Movements below 30 are considered in the “oversold” zone, and movements above 70 are considered in the “overbought” zone. AES’s RSI lingered around 65 in July 2016 and has been falling since then.
AES stock has a beta of 1.2, one of the highest among utilities. Beta compares the volatility of a stock with the market. US utilities (VPU) generally have betas below 0.5. AES’s large exposure to international and wholesale operations makes its earnings relatively less stable and its stock movement more volatile.
US merchant power players (NRG) (DYN) have betas around these levels. Their volatile stock movements continued to negatively impact investors’ returns. Comparatively, AES seems to be better placed in spite of its high beta.
In the next part, we’ll see how AES is valued compared to its peers.