Sempra’s cooperative agreement with activists
Sempra Energy (SRE) stock notably outperformed its peers in California as well as utilities (XLU) at large. On September 18, Sempra Energy announced a cooperation agreement with its activist shareholders Elliott Management and Bluescape Energy Partners, which collectively own 4.9% in Sempra Energy worth $1.6 billion.
As part of the agreement, the parties will appoint two new directors to Sempra Energy’s board. According to the company’s website, Sempra Energy will repurpose its board’s current LNG Construction and Technology Committee into a new LNG and Business Development Committee.
Sempra Energy stock has risen ~11% so far in 2018, while broader utilities have risen ~3%. Currently, Sempra Energy is trading at $118.9—nearly 2% and 7% above its 50-day and 200-day moving average levels, respectively. The fair premium to both of these support levels indicates strength in the stock. The moving average levels around $116 and $110.9 are expected to act as a support for the stock going forward.
Sempra Energy stock seems to be approaching the “overbought” zone with its RSI (relative strength index) at 69. A stock is considered “oversold” when its RSI drops below 30 and “overbought” when its RSI rises above 70. Extreme RSI values could suggest an impending reversal in the stock’s direction.
The short interest in Sempra Energy stock increased 7% on August 31. On August 15, the shorted shares in Sempra Energy were 22.2 million, while they grew to 23.7 million on August 31.
An increase in the stock’s short interest could mean that more investors expect Sempra Energy to fall from its current price level. The short interest indicates the number of a company’s shares that have been sold short and not yet squared off.