forever_green

Southern Company Outlook for 2022

Long
NYSE:SO   Southern Company (The)
Pour 2022
In my previous idea I'd said I was halting accumulation to see how SO was going to perform the rest of December. The main driver behind this decision was I didn't want to purchase shares at price levels SO hasn't been able to hold consistently. Basically: Anything above $63 I considered "wait and see". Building on my earlier idea, in 2022 I think this will change. My major expectation is for investors to search for safer assets: Bond-like equities.

My reasons for believing this are two fold:

Firstly, the investors of newer money are (I think) approaching the trough of the time vs. knowledge curve. Simply put: new money is learning enough about markets to know it doesn't know much. This will increase flows to safer sectors; namely: Utilities. Utilities, and the stable source of capital expenditure and profit they represent, will attract many investors unfamiliar with a stock market absent of Meme stocks and volatility .

Secondly, economic conditions are tightening. Simply put, inflation is hot and has completely removed any momentum the already weak "recovery" had. 2022 will, in my view, have a major theme of a return to pre-COVID economics. Namely: disinflation, lower job openings, and slowing world trade. Utilities, historically, do very well under these conditions.

Beyond 2022
As stated above, demographics and economic conditions will return to pre-pandemic structures. One of these conditions is a lowering birth rate. Seeing that SO supplies power to people, having less of them isn't a bullish indicator. However, COVID did introduce a very bullish condition for SO's area: migration. The flows of new people from liberal states into the southeast (mostly GA ) will, in my view, continue clear through this decade.

Financial conditions will also tighten significantly, regardless of FED actions. This has been the case for almost 40 years with Reserve actions having effects only at the margins. This is predominantly due to the fact that large monetary spending has placed significant bulwarks against American citizen's progression. Money can be printed but until it's cheap enough for the already over-indebted populous to borrow, debt will continue to destroy future purchasing power. The theme for the decade will be disinflation as the economy grinds to a near-halt under the weight of our own debt (this is a long process). Utilities and mega-caps will be the only place where capital can survive relatively un-molested. Flows into these assets (and the indexes that hold them) will grow parabolically as will their valuations.

Price Targets
I'd expect to see >$87 per share by or before the end of 2022.

As for right now, the stock is overbought on rather silly news (an upgrade from hold to buy). I don't expect the present price to stand over the next few months and would expect a trend down to the mid-sixties.

My new buy target, however, I've raised to $65. Anything below $60 I'd consider a very strong buy.

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