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PG&E Stock Up 9% after Citi Upgrades to ‘Buy’ Rating

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Feb. 19 2019, Updated 12:08 p.m. ET

A pure risk or a clear reward?

The wildfire-plagued PG&E Corporation (PCG) stock rose more than 9% today after Citi upgraded the stock to a “buy.” It raised PCG’s target price from $11.0 to $33.0, almost double its current market price. According to CNBC, Citi expects the imminent wildfire legislation in California to limit PG&E’s wildfire risks.

The utility faces ~$30 billion in potential liabilities associated with wildfires in 2017 and 2018. PG&E stock has rallied almost 40% since it filed for bankruptcy protection on January 29. Peer utility Edison International (EIX), which is under investigation related to the Woolsey fire, is up ~1% today.

Speculators who bought PG&E close to ~$5.0 levels just a month back could be sitting on a hefty gain of more than 200% at the moment.

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Institutional activity

According to 13F filings, almost all the top institutional investors increased their holdings in PG&E during the fourth quarter. PCG stock fell almost 50% in Q4 after the “Camp Fire,” the deadliest wildfire in California history, started in November. Among the notable additions, the Vanguard Group added ~9.6 million shares while Anchorage Capital Group bought net 9.5 million shares of PCG in Q4.

BlueMountain Capital Management bought net ~3.7 million shares in Q4 and held ~1.6% of its total outstanding shares at the end of the fourth quarter.

BlueMountain Capital Management, through a series of letters to PG&E management, explained that it disagreed with the utility’s decision to file for Chapter 11 bankruptcy protection. BlueMountain has said that it plans to launch a “slate board” by February 21 to replace PG&E’s existing board.

So far this year, PG&E stock has fallen more than 35% while broader utilities (XLU) are up 5%. Peer Edison International is up 7%.

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