I&E Exhibit No. 1 Witness: Rachel Maurer PENNSYLVANIA ... · I&E Exhibit No. 1 Witness: Rachel Maurer PENNSYLVANIA PUBLIC UTILITY COMMISSION v. UNITED WATER PENNSYLVANIA INC. Docket

IampE Exhibit No 1Witness Rachel Maurer

PENNSYLVANIA PUBLIC UTILITY COMMISSION

v

UNITED WATER PENNSYLVANIA INCDocket No R-2015-2462723

Exhibit to Accompany

the

Direct Testimony

of

Rachel Maurer

Bureau of Investigation amp Enforcement

Concerning

Rate of Return

Type of Capital Ratio Cost Rate Weighted Cost

Long term Debt 4491 528 237

Common Equity 5509 877 483Total 10000 720

Summary of Cost of Capital

rmaurer
Text Box
IampE Exhibit No 113Schedule 113

Ticker Company Industry

AMGN Amgen Biotechnology

BAX Baxter Medical Supplies (Invasive)

BMY Bristol-Myers Squibb Drug

BRO Brown amp Brown Financial Services (Diversified)

DGX Quest Diagnostics Medical Services

DVA DaVita Healthcare Medical Services

HAE Haemonetics Corp Medical Supplies (Non-Invasive)

KR The Kroger Co RetailWholesale Food

LANC Lancaster Colony Household Products

MCY Mercury General Insurance (PropertyCasualty)

MKL Markel Corp Insurance (PropertyCasualty)

NLY Annaly Capital Real Estate Investment Trust

NWBI Northwest Bancshares Thrift

ROST Ross Stores Inc Retail (Softlines)

SHW Sherwin-Williams Retail Building Supply

SJM Smucker (JM) Co Food Processing

SLGN Silgan Holdings Packaging amp Container

SRCL Stericycle Inc Environmental

TAP Molson Coors Beverage

TECH Bio-Techne Corp Biotechnology

THG Hanover Insurance Group Insurance (PropertyCasualty)

WMK Weis Markets RetailWholesale Food

NYSE Alleghany Corp Insurance (PropertyCasualty)

Source UWPA Exhibit No PMA-1 Schedule 8

Ms Aherns Proxy Group of Non-Price-Regulated Companies

rmaurer
Text Box
IampE Exhibit No 113Schedule 213Page 1 of 1813

Medical Services

Index June 1967 = 100

RELATIVE STRENGTH (Ratio of Industry to Value Line Comp)

120

240

360

480

600

720

960

1200

2012 2013 2014 20152009 2010 2011

INDUSTRY TIMELINESS 20 (of 97)

March 13 2015 MEDICAL SERVICES INDUSTRY 799With the calendar nearing the end of the first

quarter of 2015 the Medical Services Industrycontinues its clean bill of health After severalyears of average to subpar returns the AffordableCare Act has woken up a number of sleepingdragons particularly hospital chains With thatthe sector remains within our top-20 IndustryRankings

We have said for some time that those entitiesthat can get out ahead of the reform changes willdistance themselves from the pack in terms ofgains and many of the stocks within our coverageare doing just that Too when jittery investorshave a flight to quality there are now top-notchnames waiting for them in this space United-Health Group is a member of the Dow 30 and hasbeen on a steady incline since the winds of reformbegan to blow Aetna is another industry bell-wether held in high regard

Still healthcare in the United States remains inan evolutionary stage and more alterations to theway business is done are forthcoming Those com-panies that have proven their acumen at adjustingshould continue to prosper while those that havestruggled out of the gate are learning that thecurrent landscape is not a sprint but a marathon

Hospitals Heat Up

Revenues at a number of the hospitals under ourcoverage are skyrocketing Yes a consolidation trendheading in to the onset of the Affordable Care Act playeda large role but an uptick in the percentage of patientswith medical coverage has also been a boon The simplefact that these operators are now laying out less moneyto care for uninsured patients was enough to spark arally in share prices when the early whispers of reformbegan True some chains are having trouble getting thetop-line success to transfer into bottom-line gains how-ever the investment community is being patient (thevirtue) in that regard Tenet Healthcare is a perfectexample of such a scenario

For some time we have opined that hospitals will bethe largest benefactor from the ACA when all is said anddone and we stand by that belief In fact those thataggressively added to their bed counts in themonthsyears heading up to the legislation will almostcertainly reap the largest rewards when the dust ofreform settles Tenet and Universal Health Services aretwo entities that fit this bill Enrollment figures for 2015are off to a solid start and we see no reason why aslowdown might occur

HMOs Now Fans Of The ACA

At first blush health maintenance organizations wereby no means enamored with the Obama Administra-tionrsquos ideas for altering healthcare in America It wasperceived that they would foot a good portion of the newtaxes and fees that the industry was facing Truth betold many companies (see Aetna) are operating atsignificantly higher tax rates but making big profitsnonetheless Management was able to see the changescoming and invoke strategic price increases to helpcushion the blow Even more regulations are being put inplace for 2015 so those with strong leadership willcontinue to shine Spending floors are going to be inplace for individual accounts and some lines of business

may even need to be eschewed in the name of profitabil-ity but these are all just signs of the new times

UnitedHealth has played the game at an above-average level as well Its position in the Dow got thisstock trending in the right direction and then interna-tional expansion (particularly to Brazil) made it evenmore of a market darling Its leadershiprsquos ability toweather the reform is unparalleled and is the primaryreason behind the fact that its stock has continually setnew 52-week highs over the last several months Thepublic exchanges are boosting enrollment figures for anumber of HMOs and these companies are churningprofits out of these additional lives

Some Distance In The Duopoly

The duopoly of Laboratory Corporation of America andQuest Diagnostics have both used reform as a steppingstone to greater market share Lesser entities have beenforced to put themselves up for sale and the large labshave feasted on them

But now that LabCorp has purchased Covance it hasbeen outperforming its brethren in terms of stock pricemomentum The deal created a lab testingdrug devel-opment titan whose projections eclipse that of QuestFrom an investment standpoint the only real advantagethat DGX has is that it pays a dividend while LH haschosen to go the acquisition route Volumes remain blasefor both members of the duopoly however brighter dayslook to be ahead

Conclusion

These are exciting times in the Medical ServicesIndustry A prolonged period of blandness has given wayto significant investor enthusiasm With that a numberof selections on the following pages are timely for yearahead performance or a solid play for appreciationaspirations three to five years hence We do cautionhowever that an equal amount of these stocks areviewed as fully valued at current prices

We recommend as always that subscribers peruseeach of the following pages to get a better idea of whichinvestment options suit the needs they have in both thepresent day and for the stretch to 2018-2020

Erik M Manning

copy 2015 Value Line Publishing LLC All rights reserved Factual material is obtained from sources believed to be reliable and is provided without warranties of any kindTHE PUBLISHER IS NOT RESPONSIBLE FOR ANY ERRORS OR OMISSIONS HEREIN This publication is strictly for subscriberrsquos own non-commercial internal use No partof it may be reproduced resold stored or transmitted in any printed electronic or other form or used for generating or marketing any printed or electronic publication service or product

To subscribe call 1-800-VALUELINE

rmaurer
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Beverage


250


500

750

1000

2011 2013 20142008 2009 2010 2012


January 23 2015 BEVERAGE INDUSTRY 1962The Beverage Industry is comprised of both

non-alcoholic and alcoholic drink makers Most ofthese equities trailed the broader market over thepast three months though a few issues were ableto buck the trend The companies in this sectorcontinue to face a tough operating environmentdue to the uneven macroeconomic climate andsome unfavorable business trends Regardlessmany of these companies remain profitablethanks to ongoing strategic efforts and their abil-ity to find new growth opportunities

Current Business ConditionsThis group will likely face its share of challenges in

the year ahead Most notably economic issues overseasand currency headwinds will probably weigh on resultsfor some of the more established names in this sectorSpecifically companies with substantial business expo-sure to Europe and South America may experience lowerrevenues and earnings in the near term Lean consumerspending in the United States is also worth notingConsequently results in the US may be uninspiring forsome of the companies in this group this year Thoughnear-term challenges will hinder top-line advances forsome of the larger players most of these companies willbe able to weather these challenges one way or another

Soft drinks are falling out of favor Consumers areincreasingly choosing alternatives to sodas due to anincreased awareness of the health issues associated withthese drinks Notably diet sodas have not been immuneto the trend As a result lsquolsquostillrsquorsquo beverages (waters juicestea etc) are emerging as the new go-to choice forconsumers In fact bottled water is on pace to assumethe mantle as the number one drink in the not-too-distant future

Wine and Spirits continue to gain ground on beer asthe top selling alcoholic category However demand forflavored spirits which has been a growth avenue fordistillers is starting to show signs of slowing Whiskeycontinues to be a popular choice though Another no-table trend is the rise of craft beer This niche has grownat an enviable clip in recent years and has now becomea formidable threat to large brewers

Operating StrategiesThis group has employed a variety of strategies to

offset the aforementioned challenges Cost-cutting re-mains a means to bolster profits Beverage makerscontinue to develop new products in an effort to keep upwith changing consumer tastes Furthermore thesecompanies are seeking out new markets with morepromising growth potential Whatrsquos more numerouscompanies have ramped up their promotional efforts inorder to grab market share in 2015

Deal ActivityConsolidation will likely continue to be the main story

here After a busy year in 2014 we look for moretransactions in the coming months In fact the new yearalready had its first deal Dr Pepper Snapple Group andKeurig Green Mountain agreed on a partnership Keurigwill make single-serve capsules of Dr Pepper Snappledrinks for exclusive use in its upcoming cold beveragesystem Note that Keurig reached a similar deal withindustry leader Coca-Cola The deal represents an inter-esting partnership for both companies and places more

pressure on Keurigrsquos competitor SodaStream Lookingahead deal activity will probably remain busy as bev-erage companies try to grab market share in a verycompetitive market

Long-term ConsiderationNew growth opportunities remain key to the top and

bottom lines given the mature nature of this industryLike other businesses beverages makers count on inno-vation for product differentiation which has becomeincreasingly important given the rise of small upstartsAs discussed lsquolsquostillrsquorsquo and premium offerings should re-main attractive markets for the foreseeable futureLastly brewers will likely continue to search for ways totap the popularity of craft beer in the years ahead

Beverage companies are searching for high-growthmarkets in an effort to increase their volumes Accord-ingly they remain focused on building their presence inemerging markets which offers attractive prospectsover the long term Indeed developing regions are animportant opportunity given the growing populationsand rising income levels in these markets

ConclusionThe Beverage Industry is ranked near the middle of

the pack for all the industries covered by The Value LineInvestment Survey While this group has some chal-lenges ahead of it there is still much to cheers goingforward Short-term accounts are advised to take acloser look at timely ranked equities Moreover a num-ber of stocks in this industry have attractive long-terminvestment prospects Not every stock in the Beveragesector pays a dividend however the equities that dogenerally offer worthwhile yields Also of note Coca-Cola is now a member of the Dogs of the Dow which is astrategy where certain investors target underperform-ing Dow stocks with high yields

We advise that investors carefully study the reportsthat follow to identify stocks that offer the best fit fortheir portfolios both for the year ahead and for the2017-2019 time frame

Richard J Gallagher



rmaurer
Text Box

Biotechnology


1000

2000

4000

50006000

8000


10000

3000

15000

2012 2013 2014 20152009 2010 2011


March 13 2015 BIOTECHNOLOGY INDUSTRY 833The Biotechnology Industry differs from its

pharmaceutical counterpart in that these compa-niesrsquo research deals with the utilization of livingorganisms such as genes and cells in efforts todiscover novel therapies for a wide range of dis-eases The process is time consuming scientifi-cally intense and costly This makes generic du-plication difficult hence leading to longer patentsand a greater exclusivity time frame

Some of this execution has changed howeverWith the implementation of the Affordable CareAct new laws are now allowing the generic dupli-cation of some of these drugs under the biosimi-lars umbrella In order to augment profitabilitycompanies such as Amgen have created a biosimi-lars unit in the business in order to capitalize onthis trend Speculatively this scenario will likelylead to some profit erosion since patients may optto use these less expensive drugs Changes willprobably manifest themselves in further volatilestock-price movements particularly once any ofthese respective companies creates a generic du-plicate to a high-demand drug

Equity Price Movement Influences

Within the past three months several biotechnologycompanies have experienced volatile stock-price move-ments Most notably the main influence on these equi-ties has been ongoing news developments For instanceBioMarin Pharmaceuticalrsquos share price spiked once thecompany released favorable clinical data from an ongo-ing trial This is typical of biotechnology firms andinvestor enthusiasm (or disfavor) is quickly evident

Also the ameliorating economic landscape favorshigher spending patterns than in the recent past Bio-technology firms had practiced a period of constrainedspending in order to conserve cash However ongoingsigns of a sustained economic recovery are likely contrib-uting to an increase in outlays This is positive in ouropinion since arguably the main catalyst for drivingpotential growth is the advancement of a companyrsquospipeline

Intriguing Pipeline Prospects

There are many companies in the industry whosepromising research endeavors suggest that they may beon the brink of further or first-time commercial successThis group includes stalwart Amgen whose gilt-edgedfinancial position facilitates numerous clinical trials indifferent arenas Another is flavor-enhancer firm Se-nomyx whose vast array of developing compounds con-tinues to intrigue food and beverage companies Otherfirms are advancing their respective pipelines by seek-ing to expand the utilization of already commercializeddrugs This is being done through ongoing clinical trialsThis group includes United Therapeutics and BioMarinPharmaceutical

Regardless of the type of research it is evident at thisjuncture that the wheels of innovation are once againturning at an accelerated rate

Consolidation Picks Up

Acquisition activity is not too characteristic of theBiotechnology Industry However of late some compa-nies have embarked on this path as a means of expand-

ing the business One such case was that of NPSPharmaceuticals which was bought by Ireland-basedShire plc and consequently taken out of the Survey Onthe other hand we welcome Medivation plc to theSurvey This companyrsquos top- and bottom-line prospectshave been enhanced in our opinion by an acquisition(see individual report)

The High RiskReward Scenario

Although aforementioned growth platforms appearsolid tides are quick to turn The main setback comesfrom failed or discouraging clinical readouts that often-times send investors headed for the exits On the flip-side commercial success and blockbuster potential caneasily lead to boons for account seekers that have apenchant for risk

The Regulatory Environment

The regulatory environment is highly favorable atthis juncture in our view Many of these companiesrsquopipelines involve the discovery of treatment options forrare diseases and for which there is a dearth of marketoptions Hence the FDA and other regulatory agenciesabroad typically expedite the review process

Conclusion

The vast majority of biotechnology companies in ourSurvey are unfavorably or neutrally ranked for year-ahead relative price performance This is partly due tospeculation of the pipeline and investors often adopt await-and-see approach

On-the-other hand many of the 16 companies in-cluded in our review possess above-average capital ap-preciation potential over the 2018-2020 time frame Ouroptimism stems mainly from promising pipelines

As always we advise investors to read the individualreports that follow before committing any funds to thishighly speculative space

Nira Maharaj



rmaurer
Text Box

Financial Services (Diversified)



1500

2100

2400

2700

3000

2012 2013 2014 20152009 2010 2011

1800


February 13 2015 FINANCIAL SERVICES (DIVERSIFIED) 2531The Financial Services (Diversified) Industry

consists of a collection of corporations that offer awide array of products and services Asset man-agement and credit card companies make up thetwo biggest groups but after that few similaritiesexist Insurance banking brokerage aircraftleasing and pawn lending are among the manybusinesses that are included within this industryThis broad range makes it difficult to formulateany consensus about the overall health and pros-pects of this sector

Since our November report the industryrsquos Time-liness rank has remained towards the midpoint ofthe 97 industries covered by Value Line As thebull market for equities continues money-marketfunds will likely lag for the short haul Too assetmanagers exposed to fixed income will be im-pacted by interest rate changes which are ex-pected to materialize later this year That saidcompanies will look to offset such pressuresthrough cost-cutting initiatives and business ex-pansion Regulatory concerns remain among mostcompanies in this industry as the three segmentsoutlined in this report Asset Managers PawnLenders and Credit Card companies are all ex-posed to regulatory changes on a constant basisInvestors will want to look at the companies withthe least exposure to such risk and those that holdstronger capital positions when making invest-ment decisions

Credit Card CompaniesCard issuers are focused on driving profits by taking

advantage of low credit costs Too the Federal Reservereported that 2014 had the lowest level of card delin-quencies since they began tracking the metric Thiscoupled with growth in overall employment figuresshould help maintain low consumer credit costs How-ever despite such positive factors credit card providerssuch as American Express Discover Financial Servicesand MasterCard will need to focus on improving loangrowth and maintaining adequate reserves as competi-tion heats up in this segment of the industry Applerecently announced the launch of its Apple Pay servicea digital wallet service that enables contactless accep-tance at many merchant locations While other digitalpayment companies have struggled to take over theindustry due to difficulties building a new networkApple already has an existing network with its customerbase which will help it build on relationships to expandits new product offering This could be a potentialheadwind along with the upcoming PayPal spinoff ascredit card companies will need to adapt to new techno-logical advancements in the payment industry

Economic trends suggest a continuation of favorabletrends in jobless claims and employment figures whichaugurs well for credit costs Too increased discretionaryspending and available income will likely keep delin-quencies low for the time being American Expressrecently announced a hike in its merchant fee to improveprofits However interchange regulation could preventsome of this growth if merchants succesfully push backagainst the higher fees Risks include losing customersto cheaper payment options which could lead to a loss inmarket share Note there has been extensive litigationover lsquolsquoanti-steeringrsquorsquo where merchants argue credit cardcompanies violate antitrust law by making merchantsagree not to steer customers to specific payment meth-

ods There could be a strong headwind against revenuegrowth if the judge rules credit card companies will haveto lower fees

Asset ManagersAsset managers will maintain a close eye on the

expected upcoming interest rate rises as they are con-cerned with the impact potential rate changes couldhave on fixed-income portfolios Some companies maylook to consolidate this part of their business throughfund mergers and liquidations In addition many man-agers are exposed to foreign exchange risks as the dollarcontinues to strengthen Companies such as Invescohave significant exposure to the pound sterling and havetaken measures to hedge such risks through optioncontracts Other investment managers such as Glad-stone Capital are exposed to fluctuations in oil pricesgiven that their portfolios consist of oil- and gas-relatedcompanies Building strong reserves maintaining ex-penses and business restructuring efforts might beneeded to remain competitive in such a changing andvolatile landscape

Pawn LendersAs gold prices remain muted and consumer economics

improve pawn lenders seem to be having difficultygenerating merchandise-based loan growth Domesticpawn loan balances have fallen in 2014 However com-panies such as First Cash Financial and EZCORP havea solid foothold in Latin America which could offset suchdeclines That said Cash America recently sold off itsrisk-heavy online payday lending facility and has re-structured its business to improve its core pawn-basedportfolio and generate organic growth This company isthe only one ranked favorably for Timeliness in the pawnsector

ConclusionConservative investors will want to avoid stocks with

elevated Beta coefficients and Below-Average ranks (4 or5) for Safety as they are subject to higher risk Inter-ested investors should peruse the following reports withcare before making any investment decisions and asalways focus on stocks that are favorably ranked forTimeliness

Eugene Varghese



rmaurer
Text Box

Drug


225

450

900


11251125

675

2012 2013 2014 20152009 2010 2011


April 10 2015 DRUG INDUSTRY 1602In terms of share-price performance the Drug

Industry has been among the most-rewarding sec-tors under Value Linersquos coverage in recent yearsCombined the group advanced 25 in value dur-ing 2014 which followed up an even more impres-sive 35 gain in 2013 Although top-line genera-tion for branded companies has provenchallenging over this time largely due to the lossof several big-name patents a slew of MampA activ-ity and some encouraging late-stage pipeline newshas been sufficient in driving positive investorsentiment During the first quarter the consolida-tion trend continued with the announcement ofseveral more multibillion deals Whether it begeneric companies trying to gain scale or theirbranded counterparts trying to become leanerMampA activity continues to reshape the pharma-ceutical landscape

In the following report we touch on recentlycompleted deals and those that are pending Wealso provide a few recommendations for investorsseeking to add drug exposure to their portfolios

AbbVie Eyes PharmacyclicsThe former pharmaceutical arm of Abbott Labs had

been rather quiet since terminating its $55 billion acqui-sition of Shire last year However all that changed inearly March when AbbVie announced intentions to buyPharmacyclics in a deal valued at $21 billion Under theterms the company will pay $26125 a share in cash andstock representing a premium of 13 to PCYCrsquos prean-nouncement closing price The transaction stands togreatly enhance AbbViersquos clinical and commercial pres-ence in oncology and will provide access to Pharmacy-clicrsquos cornerstone cancer drug Imbruvica

Actavis to become AllerganOf all the companies in this space none can match the

torrid MampA spree seen by Actavis plc in recent yearsThe drugmakerrsquos meteoric rise from a company withannual sales of $35 billion in 2010 to one with antici-pated sales of $21 billion in 2015 has been unparalleledActavis has refused to take its foot off the gas high-lighted by its purchase of Watson Pharmaceuticals in2012 Warner Chilcott in 2013 Forest Laboratories in2014 and most recently Allergan in March 2015 Whilesome worry that the company may be overextendingthis is yet to be seen What is clear is that Actavis hasnow established itself as a top-10 player in the industryManagement indicated that it would be changing itsname to Allergan this year The combined entity isexpected to top $20 billion in annual revenues in 2015

Glaxo Novartis and Lilly Complete Asset SwapThe three drugmakers completed a near $30 billion

asset swap in the first quarter geared toward strength-ening what they considered to be their core businessesUnder the terms Novartis paid $16 billion for Glaxorsquosoncology assets while Novartis sold its vaccines unit toGlaxo for $7 billion and its animal health business to EliLilly for $54 billion

Valeant Returns to the Deal Table to Grab SalixValeant Pharmaceuticals has been one of the biggest

advocates of growth through MampA in recent years Itsbuying spree has transformed it from a $1 billion entityin 2008 to a near $50 billion giant today Despite beingthwarted in its attempt to buy Allergan late last year

Valeant responded in the first quarter with its $173-a-share ($111 billion) deal for North Carolina-based SalixPharmaceuticals The company fended off rival EndoInternational in a brief bidding war and as a result willgain access to Salixrsquos gastrointestinal drug Xifaxan Thetransaction closed just as this Issue was going to press

Pfizer Puts Strong Balance Sheet to UseIn early February the New York-based drugmaker

announced intentions to buy Hospira a leading providerof injectable drugs and infusion technologies Under theterms of the deal Pfizer would pay $90 a share whichrepresents a 39 premium to HSPrsquos preannouncementclosing price If successful the acquisition would givePfizer access to Hospirarsquos attractive lineup of biosimilarsand significantly enhance its Global Established Phar-maceuticals business (GEP) The deal is expected toclose in the second quarter and would represent a niceresponse from Pfizer after its failed bid to acquireAstraZeneca last year

Core HoldingsThe Drug Industry offers a wide base of 3+ yielding

equities with superior marks for Safety and FinancialStrength A few recommendations for investors seekingincome with relative stability include Pfizer Merck ampCo Novartis GlaxoSmithKline and Eli Lilly amp Co Formomentum accounts seeking year-ahead growth Act-avis and Merck currently hold Above Average (2) ranksfor Timeliness

ConclusionIn terms of Timeliness the Drug Industry has re-

mained relatively flat since our January review rankingjust outside of the upper half of sectors under ourcoverage (60th out of 97) Besides Actavis and Merck themajority of big-name players in the group are currentlyranked Average (AstraZeneca Novartis Valeant) or Be-low Average (Pfizer Eli Lilly) At this time momentumaccounts are likely to find a larger selection of appealinginvestment targets elsewhere That said the sector stillprovides a strong base of safer well-established optionswith above-average income components

Michael Ratty



rmaurer
Text Box

Environmental

Index August 1971 = 100


150

300

450

600

750

900

1200

1500

2012 2013 2014 20152009 2010 2011


February 27 2015 ENVIRONMENTAL INDUSTRY 413Between early 2008 and mid-2012 the leading

companies in the Environmental Industry gener-ally experienced declines in their industrial andspecial waste revenues The reversal of this trendhas since resulted in decent top-line organic gainsby the three largest waste collection companiesWaste Management Republic Services and WasteConnections Also thanks to easing competitivepressures the industryrsquos overall pricing has gen-erally risen well above the inflation rate over thepast four years and prospects for a continuationof this trend in 2015 are good Moreover amplecash flow which has been allocated lately to ac-quisitions share repurchases and dividend in-creases is a plus We also look at Stericycle andTetra Tech They specialize in medical waste dis-posal and environment-related engineering andconsulting services respectively

Current Operating EnvironmentMainly due to the economic malaise that surfaced in

2008 waste volumes generated by industrial and com-mercial customers were below prior-year levels throughmid-2012 Since then though industrialrolloff and spe-cial waste markets volumes have generally picked upparticularly at Waste Connections Also price increasesof 3-4 excluding surcharges were the norm between2008 and 2010 before subsiding somewhat last yearMeanwhile a challenging recycling business hurt 2014rsquosfourth-quarter profits at Waste Management and Repub-lic Services But planned fee hikes and cost-cuttingmeasures suggest a modest recovery as 2015 progressesMeanwhile Waste Management is being aided by furtherconsolidation synergies and a recently completed re-structuring program at the core operation Too head-winds resulting from lower prices at its recycling andwaste-to-energy operations are abating And RepublicServices will likely get a lift in 2015 from its just-completed acquisition of a leading waste solutions pro-vider serving domestic oil and natural gas producersFinally thanks to increased contributions from twoacquisitions in 2012 Waste Connectionsrsquo earnings in-creased by 39 over the two-year period ending Decem-ber 2014

Calgon Carbon is a leading domestic producer ofactivated carbon and should benefit from a number ofprospective regulations by federal and state agenciesThat is powdered activated carbon (PAC) is the primeabatement technology for mercury in flue gas generatedby coal-powered plants This will likely become thelargest market for activated carbon Following the sig-nificant expansion in 2013 and 2014 of the companyrsquosPAC production capacity in the United States and over-seas additional steps in this regard are slated to becompleted this year at its Kentucky plant Also regula-tory requirements related to the treatment of ballastwater discharged by vessels and potable water releasedby municipalities are slated to be phased in over the nextyear or so This scenario augurs well for Calgon sinceitrsquos a leader in the development and deployment ofrelated water-treatment systems

Acquisition BenefitsUS Ecologyrsquos mid-2014 purchase for about $465 mil-

lion of Michigan-based EQ has significantly bolsteredsome of its key financial metrics Notably the additionhas almost tripled USErsquos revenues and this yearrsquosestimated cash flow is $150 (67) above 2013rsquos level

Moreover it has provided numerous cross-selling oppor-tunities and should enable US Ecology to achievesteadier top- and bottom-line growth Also thanks toproceeds from Waste Managementrsquos sale of two sizableoperations its cash assets jumped to $13 billion at theclose of 2014 The company plans to use much of thesefunds in 2015 for acquisitions and share repurchases Ithas signed a letter of intent to purchase a sizable wastecollection operation and that transaction should closeshortly Too board authorized stock repurchases for2015 are $1 billion Finally Waste Connectionsrsquo $13billion purchase in late 2012 of a sizable company thatprovides oil field waste-treatment services was a keyfactor behind the resumption of its earnings uptrend

Leaders In Two Waste Treatment NichesStericycle is one of the largest providers of regulated

medical waste management services in the US withabout a 40 market share Its growth prospects inforeign markets are bright as well Owing to the costsinvolved in upgrading existing waste treatment facili-ties many laboratories and hospitals are using Stericy-clersquos outsourcing services to comply with more-stringentregulations Accelerated acquisition activity lately isanother plus

Meanwhile we think Tetra Tech longer-term revenue-and earnings-growth prospects are impressive Over thepull to decades end it should see strong order improve-ment from both domestic and international clients par-ticularly for its technical support services and its envi-ronmental remediation business Notably Tetrarsquosexposure to industrial water projects is quite promisingwhile the recent exiting of its riskiest and least unprof-itable units is a plus

ConclusionOf the stocks discussed above the timely shares of US

Ecology offer attractive 3- to 5-year appreciation poten-tial Also good-quality Waste Management stock shouldappeal to income-oriented investors given its above-average dividend yield and the prospect of increasedannual payments Finally neutrally ranked Calgon Car-bon and Tetra Tech shares have good appreciation poten-tial to 2018-2020

David R Cohen



rmaurer
Text Box

Food Processing


200

400

600


1000

800

2011 2013 20142008 2009 2010 2012


January 23 2015 FOOD PROCESSING 1901The Food Processing Industry is a broad group

with companies that operate in various subsec-tors For the most part it is comprised of NorthAmerican packaged foods manufacturers meatprocessors and agricultural businesses

Competition in the Food Processing Industry isfierce as consumers often have many similar of-ferings from which to choose Too economicgrowth outside the US remains underwhelmingand foreign currency translations are a concernfor many companies A recent outbreak of avianflu has prompted China and other countries totemporarily ban imports of poultry products fromthe US Still profits may well rise as commodityprices have generally fallen and external growthhas added to companiesrsquo bottom lines As it standsnow this grouprsquos Timeliness rank edged up to 39from 46 previously

Commodity Price EnvironmentAlthough they spiked near the end of the year record

harvests allowed prices for corn and soybeans to declineabout 15 and 10 respectively in 2014 In a recentreport the USDA noted that stockpiles remain elevatedwhich in turn should keep price levels of these commodi-ties subdued in 2015 Such an environment augurs wellfor profits of poultry and egg processors like TysonFoods Pilgrimrsquos Pride Sanderson Farms and Cal-Maine Foods since grain-based feeds comprise the ma-jority of the cost of goods for each of these companies

Similarly wheat prices are forecast to remain rela-tively benign in the year ahead Issues such as JampJSnack Foods and Snyderrsquos-Lance whose gross marginsare tied heavily to this commodity stand to benefit fromthis trend Although more diversified companies includ-ing General Mills and Kellogg would also see an upwardbias to gross margins from lower wheat costs

On the other hand coffee prices jumped more than20 in 2014 and may remain elevated owing largely todrought conditions in Brazil As such certain producersof branded packaged coffee such as JM Smucker andMondelez International will likely continue to see someadverse effect on their PampLs

Finally after increasing about 15 in the first sevenmonths of 2014 cocoa prices largely retreated throughyear end That coupled with the fact that sugar nowtrades about 13 below year-ago levels should benefitsweets purveyors like Hershey Co and Tootsie Roll

Overall expectations point to a broadly accomodativeinput cost environment in 2015 And with improvingunemployment and the precipitous drop in oil pricessince mid-2014 (translating to more discretionary in-come for consumers) we think food manufactures ingeneral may be able to pare back promotional offeringswhich could provide a profitability tailwind

MampA And RestructuringOverall global packaged food sales are expected to rise

24 annually through 2019 Given this meager organicgrowth outlook we expect food processors to tap gener-ally strong balance sheets to augment growth via MampAin 2015 and beyond For example both Pinnacle Foodsand Pilgrimrsquos Pride have publicly stated interest inpursuing acquisitions In addition there is every reasonto expect Treehouse Foods an established leader inprivate label industry consolidation to continue alongthis strategic path

One noteworthy recent transaction involved ChiquitaBrands Two Brazilian companies initially stepped for-ward with similar offers to buy the company outrightAfter much negotiation on January 6th a tender offerfor Chiquita was completed by Cutrale-Safra for $1450a share for a total of $13 billion including Chiquitarsquos netdebt

Earlier this month media reports concluded that 3GCapital Partners is mulling over the idea of acquiringfood or beverage companies Indeed 3G reportedly hasreceived pledges from investors totalling $5 billion for anew takeover fund Potential targets cited were Camp-bell Kellogg and PepsiCo all of which traded higher inresponse to the speculation

In terms of restructuring a few years ago Dean Foodscreated value by spinning-off Whitewave Foods whileKraft did the same via a split to form Mondelez Todayseveral companies including Kellogg General Mills andArcher Daniels Midland are instituting (or continuing)restucturingcost-saving efforts aimed at bolsteringlong-term earnings growth

Favorable Long-Term Outlook For Food SalesNotwithstanding near-term uncertainties over the

next 10 years GDP per capita is expected to rise nearlyfive times faster in emerging economies than in devel-oped nations Indeed the World Bank projects that inyear 2030 the vast majority of the worldrsquos population willnot be impoverished

To serve this expected boom in demand the world willhave to produce as much food in the next 40 years as ithas in the past 10000 In addition the rising middleclass will likely demand higher-quality diets whichbodes well for naturalorganic players such as HainCelestial Whitewave Foods and Boulder Brands

ConclusionMany companies herein are consistently profitable

and are committed to returning cash to shareholdersAnd despite tough food industry conditions we believemost portfolios would benefit from including some mem-bers of this traditionally defensive sector As always weadvise investors to carefully evaluate each companyreport prior to making investment decisions

Michael Lavery



rmaurer
Text Box

Household Products


40

80

120

160

200


240

320

400

2012 2013 2014 20152009 2010 2011


March 27 2015 HOUSEHOLD PRODUCTS INDUSTRY 1189The Household Products Industry has contin-

ued to trudge along over the past few months Andthe group is ranked in the bottom third of theValue Line Investment Universe for year-aheadrelative price performance

Nevertheless the members herein have beenhard at work Will their internal improvementsportfolio expansion and diversification effortsbrighten the consumer goods conglomeratesrsquonear- and long-term prospects

Cleaning House

During and following the recent recession manyconglomerates began widescale restructuring efforts tooffset inflationary pressures and higher operating ex-penses Most are no longer relying on aggressive stream-lining moves as heavily as they once did Some such asJarden or Spectrum Brands are liable to use the inte-gration of new acquisitions as an opportunity to optimizetheir businesses

Some may still consider divesting less-profitable divi-sions Newell Rubbermaid is in the midst of overhaulingits business And Energizer Holdingsrsquo plan to split itscompany in two (spinning off its personal care segment)is well under way

Too ongoing cost-cutting activities ought to bolsteroperating margins And even though some input ex-penses have been declining thanks to falling prices foroil and other commodities the consumer goods makersmay still rely on pricing measures to boost profit re-turns

Improving the Product Pipeline

The household goods makers will likely use discretion-ary capital to invest in their portfolios Many here havea long history of mergers amp acquisitions and will prob-ably scan the market for assets that will complementtheir current businesses Too some have used recentadditions to better diversify their holdings to expandtheir international presence or to help them enter newmarkets We would not be surprised if the manufactur-ers pursued smaller yet accretive additions in thecoming years

Others have been ramping up their research amp devel-opment budgets and have been improving their pipe-lines by launching new offerings Technological improve-ments may also play an important role moving forwardStill these companies operate in a pretty competitiveenvironment and will continue to fight for shelf space

Consumers tend to buy household necessities evenwhen times are tough And since most of the companieshere sell items deemed lsquolsquoeveryday luxuriesrsquorsquo they faredpretty well during the latest recession But the house-hold goods makers are still trying to regain the consum-ers that eschewed pricier brand names for private-labeland generic products when they tightened their pursestrings Consequently the companies increased market-ing and advertising efforts over the past few monthsThey will probably emphasize brand-building initia-tives to increase customer loyalty Plus several areutilizing social media to better promote their productsand to grow their customer base

Global Growth Efforts

Geographic diversification has led to dynamic top- andbottom-line growth for many here over the past severalyears The consumer goods makers turned their atten-tion overseas in pursuit of undersaturated niche mar-kets

Some even moved facilities abroad to take advantageof lower operating costs in emerging nations Whileothers improved their global distribution efforts to ex-tend their market reach

Nevertheless overseas investments were not withoutrisk The companies can be vulnerable to less-stablepolitical and economic environments

In recent months the strength of the US dollar hasnegatively impacted foreign currency exchange ratesConsequently companies with a large exposure to inter-national markets particularly South America (such asColgate-Palmolive Kimberly-Clark and Clorox) willlikely struggle in the coming months

Conclusion

This industry has long been lauded for its defensivenature Namely the members herein tend to performwell regardless of the economic backdrop And the ma-ture companiesrsquo slow-and-steady growth profile and ster-ling finances help boost their conservative appeal

But those seeking near-term momentum may want tolook elsewhere for now The Household Products Indus-try has struggled over the past few months and contin-ues to loiter in the bottom half of the index for year-ahead Timeliness And few of the members stand out forrelative price performance even though some of theissues have gotten lifted by the recent market rally

But for those with a longer-term bent a few issueshere hold decent capital appreciation potential out to2018-2020 Moreover several offer attractive dividendyields which combined with their relative stabilityshould bolster their risk-adjusted total return possibili-ties

All told we caution readers from painting with toobroad a brush and recommend evaluating each indi-vidual report before making any capital commitments

Orly Seidman



rmaurer
Text Box

Insurance (PropertyCasualty)


120

240

360


480

2012 2013 2014 20152009 2010 2011


March 13 2015 INSURANCE (PROPERTYCASUALTY) 758The PropertyCasualty Insurance Industry has

roughly held its own over the past three monthsThe sector remains ranked below the middle ofthe pack for Timeliness Many PC insurers re-ported year-to-year earnings gains during the De-cember quarter of last year reflecting reducedindustrywide catastrophes However there aremany factors that affect an insurerrsquos financialsWe will dig a bit deeper in the paragraphs below asto how certain factors impact the bottom line

A Recap Of 2014Net premiums earned increased for many companies

under our perusal last year Gains in this line item canbe attributed to two main factors First is the amount ofnew business on the companyrsquos books This can bemeasured fairly easily by looking at policies in force(PIF) which is a measure of the aggregate dollar amountof all policies that are insured Another variable is rateincreases particularly during policy renewal season(Most insurersrsquo policies renew once a year though thereare situations when renewals are biannually) At thisjuncture the insurance industry remains in an up cyclethough the rate of increase has diminished in recentmonths This is particularly the case with standardinsurance policies More-specialized products generallyfared a bit better

Another line item that was a positive factor last yearwas the combined ratio This metric is comprised of boththe loss and expense ratios The loss ratio was generallyvery favorable relative to historical averages for mostcompanies we review This largely reflects a quiet hur-ricane season on the domestic front along with below-average catastrophe-related losses in aggregate Fur-thermore more-stringent underwriting standards lent ahelping hand Indeed insurers for the most part haveshored up their underwriting book by insuring onlythose policies that adhere to their riskreturn guidelinesMost companies seemed to have learned their lessonfrom the late 1990s when they were writing policies withattention mainly on garnering new business with lessfocus on margins The industry expense ratio also de-clined last year as costs were spread over a largerpremium base Tight cost-control was also likely a factor

Finally investment income decreased for the aggre-gate insurance sector While increased premiums helpedto boost invested asset levels low bond yields madeincreases in this line item difficult if not impossible formany insurers Fixed-income returns are near historicalnadirs which means that companies are reinvesting ateven lower yields in many instances Some insurersinvest in equities limited partnerships and other in-struments in order to shore up returns but this adds ameasure of risk to their portfolios and thus exposure tosuch instruments is generally modest to moderate

Whatrsquos AheadThe million dollar question is lsquolsquowhat are the prospects

for the insurance market in 2015 and 2016rsquorsquo Currentlywe look for the rate of increases in policy renewals tocontinue to decelerate over the next year or two barringa pickup in storm activity Weather-related catastrophescan be viewed as a double-edged sword for insurers Onone hand reduced catastrophe-related losses (individualevents that amount to more than $25 million in losses)help to lift earnings as fewer claims are paid out On theother hand when insurers are paying out fewer claimsindustrywide capacity levels tend to rise which makes

price increases more difficult to attain Furthermorewhen rate conditions are good insurers tend to writemore business which tends to increase aggregate sup-ply Thus in a nutshell we look for slight-to-moderaterate increases across most insurance lines over the next12 to 18 months however our outlook could changedepending on the weather

The other factors are somewhat of a mixed bag and areeven more difficult to project It appears that the recentstring of quiet hurricane and storm years may soon cometo an end though of course the weather is nearlyimpossible to predict Hence we expect an uptick in theindustry loss ratio this year as recent yearsrsquo levelsappear unsustainable This would cut into earnings inaggregate though it might produce a bettersupplydemand balance

Meanwhile investment income growth is highly cor-related with interest rates Therefore we expect short-term rates to remain low until the Federal Reservebegins tightening (raising) them to keep inflation incheck Based on recent statements by Fed ChairwomanJanet Yellen this is unlikely to occur until the fourthquarter of this year at the earliest Hence we donrsquotforesee a significant uptick in investment income for theinsurance industry until 2016

Our View To 2018-2020Much of the long-term fortunes of the insurance in-

dustry are correlated with the broader economy A goodeconomy gives insurers leverage to increase rates whilethe level of competition in each segment also plays avital role Another variable to keep an eye on is indus-trywide supply Historically overcapacity is the primaryfactor behind industry downturns During such timescompanies with a stronger book of business tend to holdup better though earnings of course are pressured

ConclusionWe advise that investors carefully study the reports on

the following pages to identify those stocks that offer thebest riskreward prospects for their portfolios both forthe year ahead and over the 3- to 5-year pull

Alan G House



rmaurer
Text Box

Medical Supplies (Invasive)


40

80

120

160

200

RELATIVE STRENGTH (Ratio of Industry to Value Line Comp)240

2012 2013 2014 20152009 2010 2011


February 20 2015 MEDICAL SUPPLIES INDUSTRY (INVASIVE) 170Companies housed in the Medical Supplies In-

dustry (Invasive) have closed the book on 2014There continue to be common themes coursingthroughout the industry that have influenced eq-uity movements On a larger scale the amelio-rated economic landscape has somewhat restoredconsumer confidence and this is mainly beingmanifested through enlivened hospital admis-sions in the US

Still though there are likely to be persistentnear-term challenges Amongst these include for-eign exchange translation losses and overall weakeconomic conditions in certain countries Indeedprospects for lackluster year-ahead equity perfor-mances are evidenced by the industryrsquos low Time-liness rank (87 of 97)

The Near-Term Landscape

Companies in the Medical Supplies Industry haveperformed admirably in the face of persistent head-winds One way many have done so has been throughproduct diversification Firms such as Medtronic andBoston Scientific have shifted their respective focuses inlight of weak segment performances over the past coupleof years High-growth arenas that have stood out includeneuromodulation endoscopy and urology We anticipatethat these units should continue to progress givenheavy investments in these lucrative medical fields

On the flipside Cyberonicsrsquo attempts to reenter thedepression space were dealt a blow after the regulatorypowers recently rejected reimbursement privileges forthe companyrsquos vagus nerve stimulation device as a toolto effectively treat depression This hurt the equityrsquosperformance a bit but the stock has since reboundedUndoubtedly the company continues to perform welland the equity is one of the rare ones that stand out forabove-average year-ahead relative price performance

Another notable development has been signs of mar-ket stabilization in a once-suffering category Specifi-cally companies such as Boston Scientific and St JudeMedical have faced severe headwinds with regard to thecardiovascular arms of their businesses As mentionedsuch companies have successfully traversed these chal-lenges through a shift in focus but it is a plus that thisimportant category is once again being enlivened


The healthcare landscape has gone through somenotable transformations within the recent past Some ofthese policies have favored companies in this spacewhile other decisions have hurt performances

First the full execution of the Affordable Care Actshould increase hospital admissions This is expected tohappen because all Americans should have health insur-ance and therefore be able to visit hospitals for lowerout-of-pocket costs

On the flipside the implementation of the 23 excisetax imposed on medical device manufacturers hascaused some bottom-line hemorrhaging Although thislaw was expected to limit RampD efforts it has not done soto a large extent In fact after a long period of curtailedspending practices companies are once again investingin their pipelines

Such investments are paying off as firms such asMedtronic and Boston Scientific have recently achievedFDA approvals or are seemingly on the cusp of doing so

Noteworthy Consolidation Trends

Acquisition activities have been rampant for medicaldevice purveyors of late However the biggest consoli-dation activity has been Medtronicrsquos purchase of Covi-dien (which has since been removed from The Survey)The transaction amounts to $499 billion and has madeMedtronic one of the biggest players in the industry Themore diverse product portfolio owing to greater penetra-tion into nontraditional segments will likely complementthe companyrsquos growth agenda The new companyrsquos head-quarters will be based in Ireland and the product andsegment categories have been exponentially augmented

Growth Catalysts

In summation these companies have several growthcatalysts that should spur top- and bottom-line pros-pects One other platform has been penetration intoemerging markets that are currently in the early stagesof healthcare infrastructure including Brazil and India

Conclusion

There is a dearth of attractive short-term selections inthe Medical Supplies Industry (Invasive) These includeCyberonics and CRBard Indeed these firms are still insomewhat of transition due to healthcare policy changesand diversification attempts

That said many of these equities possess above-average capital appreciation potential over the 2018-2020 time frame We are optimistic that aforementionedgrowth efforts and a sustainable economic recovery willbear fruit over the longer term

As always we advise investors that are consideringcommitting funds in this industry to read the individualreports that follow before making any investment deci-sions To do so would give individuals a clearer picture ofcompany specific agendas including pipeline opportuni-ties and other noteworthy growth catalysts

Nira Maharaj



rmaurer
Text Box

Medical Supplies (Non-Invasive)


100

150

200

250

350


300

400

2012 2013 2014 20152009 2010 2011


February 20 2015 MEDICAL SUPPLIES (NON-INVASIVE) 198The Medical Supplies (Non-Invasive) Industry

has historically offered some of the best risk-adjusted returns in the market Many companiesin the industry have relatively modest capitalspending needs relative to their earnings Thisabundance of free cash flow has led to exception-ally strong balance sheets for some generous pay-out ratios among others and plenty of cash avail-able for acquisition activity which is drivingconsolidation in the industry

While these factors have often given stocks inthis industry an advantage in terms of risk-weighted returns for shareholders many of theissues on the following pages have gotten ahead ofthemselves in price As a result many otherwiseimpressive companies are projected to underper-form the broader market in both the short andlong term

Untimely Shares

A number of stocks here have low Timeliness ranksand are thus expected to underperform the market inthe year ahead CryoLife a developer of biomaterialsand implantable medical devices that also preserves anddistributes human tissues for cardiac and vasculartransplant applications has our Lowest (5) rank forTimeliness Indeed the company has struggled to de-liver sustained earnings growth in recent years and thestock price for this small-cap stock has a history of largefluctuations However a solid debt-free balance sheetas well as growth in some of its high-margin productcategories may attract the attention of long-term inves-tors Shares of Cutera a maker of laser and otherlight-based aesthetic systems used for hair and skintreatments are untimely as well The company suffereda large loss in 2014 and is not expected to turn a profitin 2015 either However an improving US economymay lead to a rise in demand for discretionary proce-dures which could improve Cuterarsquos business funda-mentals and lead to profitability in future years

Industry Consolidation

Some of the largest companies in this industry havebeen its strongest performers of late largely due torelatively large acquisitions For example ThermoFisher Scientific earns our Highest (1) Timeliness rankThe provider of analytical technologies specialty diag-nostics and laboratory products and services surpassedour expectations for fourth-quarter performance Itsacquisition of Life Technologies has provided more ac-cretion to companywide sales and earnings than somehad anticipated McKesson meanwhile has performedstrongly in the wake of its acquisition of Celesio aGerman generic drug producer with a strong marketposition in Europe This addition has been integratedinto McKesson as its International Pharmaceutical Dis-tribution segment which contributed over $7 billion insales in the most recent quarter The company is expe-riencing solid organic growth as well and is set fordouble-digit earnings growth over the next 3 to 5 years

Regulatory Changes

The broader healthcare sector is experiencing signifi-cant regulatory changes largely because of the Afford-

able Care Act (ACA) One particularly controversialaspect of the ACA is a 23 excise tax imposed on thesales of medical device manufacturers The effect onmost companies in the industry has been relativelyminor as much of the cost has been passed through toconsumers Capital spending which many believedwould be inhibited due to the tax has held up fairlysteadily as well Nonetheless there is significant sup-port in Congress for repealing the medical device taxand the issue is likely to be included in future politicalnegotiations Another political factor that will likelyaffect the sector is the outcome of trade negotiationssuch as an accord reached last November between theUS and China to reduce tariffs on high-tech productsincluding medical equipment The US-China agree-ment led to a push for a global accord at the World TradeOrganization (WTO) meeting in December but the bodyfailed to reach an agreement due to a dispute betweenChina and South Korea over whether flat panel displaysshould be included If such a deal eventually is reachedit would likely give a boost to this industry as themedical device market becomes increasingly consoli-dated and globalized

Dividend Payers

While many companies in the industry have priori-tized acquisitions or cash-rich balance sheets some haveused their reliable free cash flows to give investors animpressive payout For example Meridian Bioscience amaker of diagnostic test kits has maintained a policy ofpaying out to shareholders 75 to 85 of its expectedannual earnings The strong payout ratio has led to adividend yield that is currently more than double theValue Line median for that metric Industry behemothJohnson amp Johnson meanwhile has maintained a pay-out ratio of about 46 and is expected to do so for thenext few years as well As a result it also providesshareholders with a significantly above-average payout

Conclusion

While this sector includes many issues with impres-sive investment characteristics high valuations havereduced the appreciation potential of many otherwiseattractive stocks

Adam J Platt



rmaurer
Text Box

Packaging amp Container


GlassMeta lPlastic Paper Container


30

600

120

300

2012 2013 2014 20152009 2010 2011

1000

60


March 27 2015 PACKAGING amp CONTAINER INDUSTRY 1174Members of the Packaging amp Container Indus-

try have been busy lately Stock prices were upearlier this year as merger activity was off to astrong start in 2015 Two large deals were an-nounced feeding speculation over additionaldeals in the near term More recently however anumber of companies reported sharp sales de-clines due to weaker performances abroad andunfavorable currency translations This cooled offmuch of the merger-driven enthusiasm Still thevast majority of stocks in this group are up con-siderably in value so far in 2015 with MeadWestcoleading the way Meanwhile Crown Holdings com-pleted its previously announced acquisition ofEMPAQUE from Heineken NV for $12 billion

Industry Overview And Insights

The Packaging amp Container Industry is composed ofentities that manufacture and sell metal plastic glassand paper products and related packaging These ma-terials are used in various consumer and industrialgoods The sector is significantly impacted by thebroader economy as demand for packaging productsgenerally moves in step with commercial activity Thisrelatively defensive industry offers for the most partbelow-average dividend yields However stock priceshere are usually less sensitive to economic downturnsthan are other equities

Like other businesses packaging companies count oninnovation for product differentiation and competitiveadvantage Consequently RampD investments are crucialto support continuous replacement of out-of-date tech-nologies In recent years the general trends point to-ward smaller lighter and thinner packaging as compa-nies attempt to satisfy environment-consciouscustomers while reducing raw material costs Also theincreased popularity and flexibility of online salesshould be a factor in the designing of next-generationpackaging

Not all packages are created equal In some casescertain materials are better suited to protect preserveand promote a specific family of products Knowing thisa number of players in this industry concentrated theirinvestments on a particular kind of packaging Forexample AptarGroup focuses on dispensing systemsOwens-Illinois produces glass containers and Packag-ing Corp and Rock-Tenn manufacture corrugated pack-aging and containerboard offerings

The Rising US Dollar

The relative value of this major currency is on the risethanks partly to the strengthening domestic economyand poor business prospects in some international mar-kets Indeed lingering economic problems and expan-sionary monetary policies in Europe and Asia havecontributed to weaker currencies there Notably thevalue of the euro and the Japanese yen are down doubledigits in relation to the American dollar since September30 2014

These translation rates have lowered reported salesfor a number of constituents of this highly consolidatedindustry The majority of packagers in this section havesignificant operations abroad Foreign sales are oftenconverted to US dollars for reporting purposes Forexample AptarGroup and Greif generate 75 and 55of their revenues overseas respectively First-quarter

sales for both companies were below expectations withunfavorable currency rates doing much of the damage

The trend is likely to stabilize over time Neverthelessyear-over-year sales comparisons will certainly be hurtin 2015 Management teams are able to mitigate some ofthe effects of currency translations on earnings throughfinancial instruments (hedges)

Merger Talk Is At Full Force

There were two large merger proposals lately At theend of January Rock-Tenn Co and MeadWestco Corpannounced a deal to combine forces and create a corru-gated packaging giant valued at $16 billion The goal isto better position both businesses and achieve $300million in synergy savings over three years In additionboth companies reported better-than-expected resultsfor the final quarter of 2014 driving stock prices evenhigher

A month later Ball Corp also made a move Themanufacturer of metal and plastic packaging announcedan agreement to buy Rexam plc in a transaction valuedat roughly $84 billion Rexam is a producer of beveragecans This purchase should expand Ball Corprsquos globalfootprint and complement its product line up nicely Thecompanies expect to realize $300 million in synergysavings which should boost overall cash generation Onthe down side sales for Rexam were down 3 in 2014The combined entity had pro forma sales of $15 billionlast year

Both deals are pending customary approvals fromshareholders and regulating authorities For more infor-mation please consult our full-page reports

Conclusion

Investors are advised to proceed with extra cautionhere as the majority of these packaging stocks rose inprice during the early months of 2015 However oppor-tunities for significant returns remain in place ThePackaging amp Container Industry resides in the topquintile of our Timeliness spectrum As usual short-oriented accounts should take a closer look at timelyranked stocks More-conservative investors should focuson the Safety ranks and volatility indicators

Wilkeiy Tan



rmaurer
Text Box

Equity amp Hybrid REITrsquos


10

20

30

40

50

60


80

100

2012 2013 2014 20152009 2010 2011


April 10 2015 REAL ESTATE INVESTMENT TRUST 1513The Real Estate Investment Trust (REIT) Indus-

try is ranked (89) for year-ahead price perfor-mance This positions the group in the lower quar-tile of all industries covered by The Value LineInvestment Survey This unfavorable rankinglikely reflects a number of key factors For oneREITs generally do not deliver sizable annualearnings increases especially when compared tothe stocks in other more vibrant industries TooREIT shares tend to be quite stable in price re-flecting a predictable but often subdued businessoutlook Notably REITs are widely held by dedi-cated investors not traders looking for large capi-tal gains Nonetheless these high-yielding issuesdo have some specific appeal especially forincome-oriented investors

REITs are often classified by the various prop-erty sectors within which they operate As theoutlook can be variable it is worth looking atthese different REIT categories when evaluatinginvestment alternatives

Retail REITs Hold Promise

This property sector is amongst the largest andshould perform quite well in the year ahead thanks to astrong underlying environment For one consumer con-fidence as tracked by The Conference Board has gradu-ally edged higher over the past couple of years Asconsumers spend more this should in turn boost profitsfor leading retail tenants many of which are renovatingand expanding locations This is ultimately a plus forretail landlords

Value Line covers quite a few retail REITs For oneKimco Realty a major owner and operator of neighbor-hood and community shopping centers is a name towatch Given robust demand in its core markets Kimcoshould be able to lift rental rents on new and renewalleases Too while acquisitions have been a part of thegame plan the REIT has been upping its ownership inits existing joint-venture assets Given that these prop-erties are well known this strategy represents a low-risk means of expansion Elsewhere in the retail areaGeneral Growth Properties which emerged from bank-ruptcy protection in 2010 is still a leading retail REITWith a better financial footing General Growth has beenadding to its portfolio which is dispersed throughout theUnited States

Apartment Sector Still Strong

This property category has done nicely over the pastyear or so as the overall climate has improved Apart-ment demand is largely tied to the job market whichcontinues to recover at a nice pace Jobs are beingcreated in the government and private sectors and theheadline unemployment rate has dipped to under 6 inrecent months With many people back in the workforceand landing better paying positions demand for apart-ment rentals has firmed up

It is true that some consumers have been buyingsingle-family homes in contrast to renting But supplyin this market has not expanded too quickly as manydevelopers may still feel uneasy about investing in realestate due to the sharp market drop that ensued a fewyears ago Too securing mortgages has become a lengthy

and challenging process where it had once been quiteeasy

Equity Residential is a large operator in this spaceThis REIT owns a substantial amount of property con-centrated in a few large markets which provides it witha foothold in the major metropolitan areas on the Eastand West Coasts Elsewhere in the apartment sectorAvalonBay Communities is a leading real estate opera-tor It has a high-quality property portfolio and anattractive development pipeline as well as a substantialland bank which offers promising potential

Health Care Sector Also Interesting

Demand for this type of real estate remains quitestrong as the population ages and more people requirevarious kinds of medical and nursing assistance ValueLine provides coverage of the largest names in thisgroup Specifically Health Care REIT is a sizable opera-tor that has been expanding its reach through a series oftargeted acquisitions and transactions It has assets inthe United States Canada and the United KingdomNotably its UK assets are likely quite important asthis market is quite large and holds vast potentialBased on this the REIT may contemplate investing inneighboring markets on the Continent The survey alsoreports on HCP Inc another large REIT in this spaceBoth of these REITs have solid operating histories andoffer investors attractive dividend yields

Conclusion

REITs provide investors with a steady stream ofincome as well as modest capital appreciation potentialIncome investors may be interested in those REITs thathave a history of delivering solid annual dividend in-creases

As always is the case investors are directed to consultthe full-page company report in Value Line before mak-ing any specific investment decisions It is further sug-gested that investors be aware of the Timeliness ranksassigned to any issues under consideration as well

Adam Rosner



rmaurer
Text Box

Retail Building Supply


20

40

100


200

120

60

80

160

2012 2013 2014 20152009 2010 2011


March 27 2015 RETAIL BUILDING SUPPLY INDUSTRY 1137Overall it has been a good three-month stretch

for the Retail Building Supply Industry and itwould have been even better were it not fortroubles at Lumber Liquidators which was thesubject of a damaging news report that accusedthe flooring company of selling products with highlevels of formaldehyde (more below) Conse-quently LL stock has plunged recently Howeverthe rest of the group (save for Fastenal) has per-formed very well with six of the eight componentsnotching double-digit percentage returns sinceour last full-page reports went to press in lateDecember Lower energy prices employmentgains growth in our nationrsquos gross domestic prod-uct and strength in the home-improvement mar-ket have all contributed to the gains All toldowning one share of each stock under this reviewwould have resulted in a gain of roughly 9versus something closer to a 5 advance for thebroader market as measured by the SampP 500 In-dex Despite all of this however the Retail Build-ing Supply Industryrsquos Timeliness rank has slippeda few notches and continues to sit in the middle ofthe Value Line universe

The Housing Market

While the housing market is not pushing ahead at thebreakneck pace it once was gains in this importantsector of the economy have been decent and supportiveof the Retail Building Supply Industry True the sectorhas seen some choppiness after recovering steadily foryears but we hardly think its comeback is in jeopardyHarsh winter weather clearly weighed on housing in thefirst two months of 2015 with annualized housing startsfalling to 897000 units in February from 108 million inJanuary The February showing was the lowest buildingrate in a year

However this step back is likely to be short-lived anda spring rebound is probably in the cards (althoughgains could be slow and uneven) reflecting the onset ofwarmer weather historically low interest rates andongoing job creation Indeed building permits a moreforward-looking indicator notched a sequential increaseof 30 in February

The Home Depot And Lowersquos

As usual we will give special attention to The HomeDepot and Lowersquos the worldrsquos leading home-improvement retailers respectively This is becausethese two companies operate throughout North Americaoffer a vast array of products and services and focus onthe residential section of the market Consequently theyare bellwethers for the industry

Both companies turned in impressive performances inthe January period with broad-based strength acrossgeographies and merchandise categories supported byfavorable conditions in the housing and remodelingmarkets Large-ticket purchases were also solid as wereonline sales and those to professional customers Compsjumped 79 at The Home Depot edging out Lowersquos 73advance

The good times should continue for these big-boxstores The housing and remodeling markets which are

likely to be buoyed by lower energy prices favorablehome affordability levels and growth in jobs incomesand the use of credit should continue to provide atailwind from a macroeconomic prospective On a corpo-rate level efforts to court professional customers buildstronger online and omnichannel retail presences andincrease customer satisfaction are promising

The Niche Retailers

The biggest story has undoubtably been Lumber Liq-uidators The stock a Wall Street darling from mid-2011to the end of 2013 had been under pressure even beforequestions surfaced regarding the safety of its productsManagement has been adamant that its merchandise issafe and its business practices above board but its wordshave not appeared to reassure the majority of investorssending many for the exits All told the stock has beenquite volatile lately a trend that is apt to persist Whileit is still too early to gauge the full impact of theseallegations rising legal costs and a tarnished brand willlikely be thorns in the companyrsquos side for some time

The rest of the group has done well although Fastenalstock has been a laggard as management has closedsome stores and scaled back expansion plans Exposureto energy-leveraged states may also have spooked inves-tors given low oil prices Otherwise shares of Sherwin-Williams Tractor Supply Watsco and Tile Shop have allbeen on nice runs of late

Conclusion

While this group has done well lately our TimelinessRanking System suggests that near-term performancewill likely be more in line with the broader marketaverages So momentum investors will not find anabundance of stocks here to their liking Indeed onlyLowersquos stock is ranked favorably for relative price per-formance in the year ahead Conservative investors willprobably find the most here as all stocks under thisreview are ranked Above Average (1 or 2) for Safetyexcept for Tile Shop and Lumber Liquidators Regard-less we urge readers to study our full-page reportscarefully before making any investment decisions

Matthew E Spencer CFA



rmaurer
Text Box

Retail (Softlines)


50

100


200

75

150

2011 2013 20142008 2009 2010 2012


January 30 2015 RETAIL (SOFTLINES) INDUSTRY 2201Things could certainly be better in the Retail

(Softlines) Industry While some retailers faredwell during the key holiday period the finalstretch of 2014 was not without challenges In-deed although the retail space didnrsquot seem toexhibit the level of competitiveness seen in prioryears there was plenty of promotional activityseen across the market

Retail and economic data meanwhile have con-tinued to be a mixed bag and we imagine this willbe the case through the initial months of the newyear With the winter holidays over Softliners arenow shifting their attention to the upcomingspring season and keeping their offerings ontrend Too many will likely remain focused ongrowing their businesses whether via global ex-pansion andor by building up their online pres-ence Elsewhere some retailers have faced pres-sure from activist investors

Since we last went to press in October thegrouprsquos Timeliness rank has fallen from themiddle of the range which means there are fewequities here that are pegged to beat the broadermarket in the year ahead But investors with along-term view have much to choose from includ-ing some stocks that pay dividends

Retail By The NumbersNo doubt the macroeconomic situation is far from

ideal as there are both pockets of strength and weak-ness Although trends appear to be moving in an overallpositive direction retail data have continued to showunevenness For instance US consumer confidence (akey metric that gauges the publicrsquos sentiment on theeconomy and its direction) picked up after a brief re-treat Notably following a decline in November theConsumer Confidence Index rebounded in December(the latest reading available at the time of this writing)The improvement albeit modest was certainly welcomefor retailers Consumers seemed more upbeat aboutcurrent business conditions and the job market butwere moderately less optimistic regarding the short-term outlook Expectations for personal earnings growthalso declined Nonetheless the overall tone of the datawas favorable

This good news however was tempered by a disap-pointing retail spending report for December To witUS retail sales slipped by a worse-than-anticipated09 in the final month of 2014 behind the increase of04 logged in November Excluding the auto compo-nent core sales fell 10 in December with declinesacross many categories including clothing While thiswas a letdown we note that sales for the year were upmore than 3 Still looking at the big picture the reportwas a minus amid strength seen in other parts of theeconomy The data are noteworthy as they give clues asto where consumer spending (constitutes more thantwo-thirds of gross domestic product) is headed

Teens and Fashion Hits amp MissesItrsquos no secret that many of todayrsquos hottest fashion

trends are actually set by adolescents and young adultsBut as a consumer segment they are perhaps among themost capricious of shoppers Indeed this group oftendictates which fashions will take off and which oneswonrsquot and trends can change virtually overnight Thatmakes it especially imperative for teen apparel retailersto offer a compelling assortment and strong brands And

although price is not necessarily an obstacle teens havebeen balking at high-priced apparel lately adding to thechallenges facing some Softliners It seems lsquolsquofast-fashionsrsquorsquo or inexpensive mass-produced versions ofhigh-end designerwear are growing more popular thesedays creating headwinds for retailers like Aeropostaleand Abercrombie amp Fitch where merchandise has beenlargely focused on logo-centric styles

Expansion InitiativesFor retailers facing a mature market driving profit

growth is surely challenging To compensate for thatsome companies are seeking to expand globally tappingmarkets where economies are holding up and theirfashions are gaining popularity Expanding the onlinechannel (or e-commerce) is another opportunity beingpursued by many Softliners With greater access tosmartphone technology e-commerce offers consumersthe convenience of shopping without making the trip tothe mall As Internet shopping rises and online compe-tition heats up those with brick-and-mortar stores arebecoming evermore focused on building up their ownpresence on the Web to gain market share

MiscellaneousAlthough there have been a few takeover deals along

the way the Softlines space typically doesnrsquot draw muchleveraged buyout activity given the volatile nature ofthe business and unsteady fundamentals But on a fewoccasion activist investors (or private equity firms) haveturned up the heat on some companies urging forimproved profitability better returns or even a sale ofoperations Express was recently a takeover targetthough the deal fell through as we went to press

ConclusionThe Retail (Softlines) Industry is a good destination

for investors seeking equities with solid 3- to 5-yearcapital appreciation potential Many members here alsoreward shareholders by doling out dividends Andthough this crowd isnrsquot top-ranked for Timeliness thereare several picks appropriate for short-term accounts Asalways subscribers should examine each stock reportindividually prior to making any decisions

J Susan Ferrara



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Retail Wholesale Food


120

240

360


480

2011 2013 20142008 2009 2010 2012


January 23 2015 RETAILWHOLESALE FOOD INDUSTRY 1942The RetailWholesale Food Industry enjoyed

solid support from investors in 2014 particularlyin the closing months of the year when most of thestocks we follow in this group outperformed thebroader equity markets Improving economic con-ditions in the US and limited indications of over-heated competitive activity suggest a decent oper-ating environment is in place for these companiesmost of which should be able to show profit in-creases when they tally the results for their 2014fiscal years

This week we welcome two new additions to ourcoverage of the industry Metro Inc and SproutsFarmers Market The former is one of the leadinggrocers in Canada operating more than 600 storesin Quebec and Ontario Sprouts meanwhile isfocused on the southern United States where itowns more than 190 stores which emphasize natu-ral and organic foods Meanwhile we will likely besaying good-bye to other members of the groupSupermarket operator Safeway is being acquiredby privately held AB Acquisition and that dealwill likely wrap up within the next week or twoToo The Pantry which operates conveniencestores in the southeastern United States reacheda deal last month to sell itself to a larger rivalCanadarsquos Couche-Tard

Wrapping Up 2014Many of the food retailers and wholesalers we follow

have yet to report final sales and earnings for their 2014fiscal years In most cases we expect the results willmake for good reading Kroger the biggest of the tradi-tional supermarket operators continues to make steadyprogress The company has been generating healthysame-store sales and stable margins inside its storesToo recent results have even gotten an added boost fromthe sharp decline in energy prices which has led to atemporary spike in margins at the fuel centers that itoperates at many of its locations (The convenience storechains have also been benefiting from wider per-gallonprofits on their gasoline sales) Elsewhere in the indus-try the performance of Whole Foods has been uncharac-teristically pedestrian of late as the natural-foods re-tailer looks to halt an ongoing deceleration in lsquolsquocompsrsquorsquo

Overall the industry though fairly noncyclical stillstands to benefit from stronger economic activity Nota-bly the group has a fairly limited geographic footprintMost of the companies we follow operate primarily in theUnited States where the economic indicators paint amuch more encouraging picture than is the case else-where in the world especially Europe Meanwhile thebattle for market share can become quite heated in thisrelatively mature arena though competitive activityappears reasonably restrained for now Inflation seemsto have heated up but companies of late look to havebeen more inclined to pass along these higher costsrather than accept narrower margins in order to captureor defend market share

More NaturalThis week marks the debut of Sprouts Farmers Mar-

ket to the The Value Line Investment Survey In thenatural-foods space Whole Foods is the dominantplayer with 400-plus stores but Sprouts is quicklymaking a name for itself The Arizona-based companyopened its first market in 2002 and through new storedevelopment and two sizable acquisitions has grown into

a 190-store chain As suggested by its motto lsquolsquoHealthyLiving For Lessrsquorsquo Sprouts aims to distinguish itself fromWhole Foodsrsquo high-end shopping experience by a morevalue-oriented approach particularly in its produce de-partment which is typically found in the center of itsstores

Aside from its day-one pop (more than doubling theIPO price of $1800 a share) SFM stock has generatedonly lukewarm support from investors since debuting in2014 The company has produced strong same-storesales growth and rising earnings but its share priceeven with a late 2014 rally is still down more than 10from its day-one close The aforementioned lacklusteroperating results at Whole Foods has likely been acontributing factor probably raising concerns about in-creasing competitive pressures Notably larger retailersincluding Kroger and Wal-Mart appear intent on ex-panding their share of the natural foods market

e-GroceryFood retailing thus far has been relatively immune to

the impact of e-commerce Companies though canrsquotafford to be too complacent as two of the biggest nameson the Internet Amazoncom and Google are amongthose trying to carve out a niche in this space Thecompany making the biggest noise in recent monthsthough is less familiar to most Instacart a grocerydelivery service founded two years ago recently raised$220 million to fund its expansion into more marketsThe deal which included some of Silicon Valleyrsquos leadingventure capital firms values the company at about $2billion Its business model centers around connectingcustomers to lsquolsquopersonal shoppersrsquorsquo who pick up and de-liver groceries from local stores As such Instacartappears to be positioning itself as a partner rather thana competitor to traditional brick-and-mortar retailersThe company and Whole Foods for instance are work-ing on plans to offer one-hour delivery of products in 15markets

ConclusionThe RetailWholesale Food Industry includes a hand-

ful of selections pegged to outperform the market in theyear On the whole the group ranks in the top third of allindustries for Timeliness

Robert M Greene CFA



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Thrift


20

120

160


40

60

80

100

200

2012 2013 2014 20152009 2010 201110


April 10 2015 THRIFT INDUSTRY 1501The Thrift Industry will likely endure another

year of thinner margins as a more substantial rateenvironment expected to be engineered by theFederal Reserve is pushed out

The lack of a sustained rise in bond yields iskeeping loan rates under pressure

Lending trends are improving but narrowingmargins may keep profits flattish into 2016

A loosely affiliated coalition of regional bankshas formed to combat what it sees as an overzeal-ous regulatory environment

The industry remains poorly ranked for Timeli-ness

Economy Not Indicating Major Rate Hikes AheadSix years into a business expansion with a reasonable

level of GDP growth and essentially normalized employ-ment levels and the key benchmark for short-terminterest rates remains near zero That strikes a numberof observers as curious at this late date The last timethe unemployment rate was where it is now around55 was in the spring of 2008 At that time the Fedfunds rate was 20 Of course the economy was alreadyin recession at that point The Federal Reserve wouldend up reducing its target for short-term interest ratesto near zero by the end of 2008 where it has remainedever since

Given the progress in the economy there is a case to bemade that the fed funds rate should be more like 20than the 00-025 in place The feeling in somecorners is that the central bank should get on with itsrate-normalization plans if it is ever going to But theFed clearly will not be hurried into action it does notdeem fully warranted Mixed business data of lateweakness overseas the effect of the strong dollar on UScompanies and the lack of inflation are among thefactors holding it back Eventually the Fed plans to raiserates but perhaps not until later this year or even 2016For most thrifts the sooner the Fed hikes rates thebetter since it would mark a step toward improvedlending margins

Bond Market Not Too Fearful Of Rates RisingHaving the Federal Reserve raise interest rates is not

the only thing needed to create a better margin environ-ment In fact short-term rate hikes by the Fed couldbroadly lead to higher funds costs The key dynamic isinstead having yields in the bond market where long-term interest rates are determined move higher inreaction to and ahead of the Fed That is because bankloans are commonly made on a five- or 10-year basistying their rates to longer-term yields in the bondmarket

Lately though the benchmark 10-year Treasury notehas traded under 20 hardly a sign that bond investorsare worried that inflation from an overheated economyis hurting their investments But at least the yield onthe 10-year T-note appears to have bottomed out at164 at the end of January Overall there are signsthat yields are inching higher after a declining notablyin 2014 But with domestic interest rates higher than inmany large international economies foreign buyers ofUS bonds are putting a lid on yields here That maykeep the spread between funding costs and asset yieldsrelatively narrow However assuming the economyshifts into a higher gear and the Fed finally boosts ratesthere is more promise for margins in 2016 and beyond

Lending To Main Street America Picking UpNot being big fee generators for the most part thrifts

rely on loan volume along with the associated marginsfor the bulk of their income One large lending arena thegroup is making headway in is the multifamily apart-ment market The need for housing is the driving forcehere although as with all loans pricing discipline isnecessary with competition rife

While these lenders might not be financing largecorporations they serve an important niche by backingsmall to medium-sized businesses Small businessesaccount for much of the employment growth in thiscountry The industryrsquos clientele very much representsMain Street America with loans on medical office build-ings dry cleaners auto dealers and a sprinkling ofrestaurants making up a portion of the list Overallprofits are being supported by moderate loan growth

Unfortunately margin pressure is eroding much of thebenefit of balance sheet expansion Loan-loss provisionshave probably declined about as much as they may toowith credit issues from the last down cycle cleared upand the need to provision for new loans Thus for themost part it is shaping up as another year of flattishearnings for thrifts

Pushback On Stringent Regulatory ClimateThe lending business as a whole has become more

burdened by red tape since the last recessionminusa steepone Expenses are higher capital requirements aregreater and mergers have been scrutinized more closelythrough a new set of regulations Last month saw agroup of midsized banks form the Regional Bank Coali-tion aimed at pushing for the removal of the $50billion-in-assets threshold for enhanced prudential stan-dards It is not clear if the group will achieve its goal butif it is attained New York Community would be a majorbeneficiary NYCB has been going to great lengths latelyto stay under the $50 billion mark

ConclusionThe Thrift Industry is ranked near the bottom of all

industries ranked for Timeliness There are a few gooddividend-yielding stocks here for income-minded inves-tors But it will probably take a shift in the interest-rateenvironment for sentiment toward the group to improveand for performance to perk up

Robert Mitkowski Jr



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2013 2012 2011 2010 2009Type of Capital Ratio Ratio Ratio Ratio Ratio

American States Water Co

Long term Debt 3984 4224 4544 4426 4597Preferred Stock 000 000 000 000 000Common Equity 6016 5776 5456 5574 5403

10000 10000 10000 10000 10000Aqua America


10000 10000 10000 10000 10000California Water Service Group


10000 10000 10000 10000 10000Connecticut Water


10000 10000 10000 10000 10000Middlesex Water


10000 10000 10000 10000 10000SJW Corp


10000 10000 10000 10000 10000York Water


10000 10000 10000 10000 10000


5 Year Average

Long term Debt 4817Preferred Stock 019Common Equity 5164

Source Compustat


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Water Utility


700


300

600

400

500

2012 2013 20142008 2009 2010 2011


January 16 2015 WATER UTILITY INDUSTRY 1779Since our October report the stocks of water

utilities have for the most part been excellentperformers This is unusual as these equities areknown as defensive plays and typically lag inbullish markets

The industry continues to face the same prob-lems that have existed for years Chronic under-investment in the infrastructure of water utilitiesin the past has resulted in most domestic investorowned and municipal systems being antiquatedand in great need of repair

To bring these water systems up to par compa-nies are increasing their capital budgets Sincethese expenditures canrsquot be financed entirely withinternal funds the difference must be made up byissuing new debt and equity

Acquisitions of small municipally-owned waterdistricts will most likely continue to be made bythe larger companies in the group

State regulators have generally been fair indealing with water utilities

The average dividend yield of the industry hasdeclined from 3 last October to 27 This hasreduced the yield spread between water utilitiesand the median-dividend paying stock covered byValue Line from 100 to 60 basis points (The aver-age yield has increased from 20 to 21 over thisperiod)

No stock in the industry is ranked to outperformthe market in the year ahead Moreover the re-cent strength in the price of most of these stockshas significantly reduced their long-term appeal

An Excellent Three Months

The stock prices of water utilities have performedextremely well over the past three months What makesthis all the more surprising is that this occurred whenthe market averages were rising and hitting or comingclose to all-time highs Water utility stocks are mostlydefensive in nature and typically lag markets withupward momentum and outperform when stock pricesare declining Most holders of water stocks are conser-vative in nature Earnings-per-share growth may belower than the average company but profits are verywell defined These stocks are also known for both theirhigh dividend yields and solid dividend growth pros-pects Moreover they are regulated which while limit-ing the upside almost guarantees a decent return oninvestment

Americarsquos Water Infrastructure Is In Poor Shape

For years water utilities cut costs by deferring capitalimprovements on their pipelines and waste water facili-ties Consequently many now have to do extensiveconstruction to modernize and update these assetsWater distribution in the US is very different from theelectric utility business which is owned by about 50large investor-owned companies In the water sectorthere are more than 50000 small water authoritiesmostly owned and operated by local municipalities Thisis clearly an inefficient system Furthermore as morecities and towns find themselves facing financial diffi-culties they are continuing to postpone upgrading theirfacilities

One trend that has been ongoing is that larger better-capitalized investor-owned water utilities are purchas-

ing these cash-poor undersized water authorities Sincethere are a myriad of redundancies in the business thebigger company can invest the funds needed to upgradethe small acquisitions and generate more profits at thesame time Both Aqua America and American WaterWorks have made this a central part of their long-termstrategy

External Financing Will Be Required

Almost no utilities generate a sufficient amount offunds internally to cover the rising capital budgetsTherefore there should be a fair amount of new debt andequity issued in the years ahead Since no regulatedutility currently has subpar finances as of now we donrsquotforesee a major deterioration in the grouprsquos balancesheet However most will likely be in worse shape by theend of the decade

Regulation Has Been Fair

Most state commissions realize that huge sums arerequired to mostly replace aging pipelines networksTherefore they have been relatively reasonable when itcomes to allowing the companies to increase their cus-tomers bills to recoup their investment This is in starkcontrast to the sometimes cantankerous relations thatelectric utilities have with these authorities Investorsshould understand that a harsh regulatory environmentis one of the major risks that any kind of utility faces

Conclusion

As we mentioned earlier these stocks have been on aremarkable run the past few months The sharp in-creases in the price of the equities has removed much ofthe previous appeal that this group offered Indeedalmost every water stock seems to be fully valued forboth the long and short term Only one equity does standout for investors with a long-term horizon AquaAmerica

In any case we caution all subscribers to read theindividual page of every water utility to gain a betterunderstanding of the particular risks associated witheach stock

James A Flood



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Interest

Charges

Long-term

Debt

Debt

Cost

American States Water Co 22685 32608 696

Aqua America 77754 146858 529

California Water 30897 42614 725

Connecticut Water 613 17504 350

Middlesex Water 5807 12980 447

SJW Corp 20827 33500 622

York Water 5244 8489 618

Low 350High 725

Average 570

Source Compustat

2013

Range

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The Capital Asset Pricing ModelTheory and Evidence

Eugene F Fama and Kenneth R French

T he capital asset pricing model (CAPM) of William Sharpe (1964) and JohnLintner (1965) marks the birth of asset pricing theory (resulting in aNobel Prize for Sharpe in 1990) Four decades later the CAPM is still

widely used in applications such as estimating the cost of capital for firms andevaluating the performance of managed portfolios It is the centerpiece of MBAinvestment courses Indeed it is often the only asset pricing model taught in thesecourses1

The attraction of the CAPM is that it offers powerful and intuitively pleasingpredictions about how to measure risk and the relation between expected returnand risk Unfortunately the empirical record of the model is poormdashpoor enoughto invalidate the way it is used in applications The CAPMrsquos empirical problems mayreflect theoretical failings the result of many simplifying assumptions But they mayalso be caused by difficulties in implementing valid tests of the model For examplethe CAPM says that the risk of a stock should be measured relative to a compre-hensive ldquomarket portfoliordquo that in principle can include not just traded financialassets but also consumer durables real estate and human capital Even if we takea narrow view of the model and limit its purview to traded financial assets is it

1 Although every asset pricing model is a capital asset pricing model the finance profession reserves theacronym CAPM for the specific model of Sharpe (1964) Lintner (1965) and Black (1972) discussedhere Thus throughout the paper we refer to the Sharpe-Lintner-Black model as the CAPM

y Eugene F Fama is Robert R McCormick Distinguished Service Professor of FinanceGraduate School of Business University of Chicago Chicago Illinois Kenneth R French isCarl E and Catherine M Heidt Professor of Finance Tuck School of Business DartmouthCollege Hanover New Hampshire Their e-mail addresses are eugenefamagsbuchicagoedu and kfrenchdartmouthedu respectively

Journal of Economic PerspectivesmdashVolume 18 Number 3mdashSummer 2004mdashPages 25ndash46

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legitimate to limit further the market portfolio to US common stocks (a typicalchoice) or should the market be expanded to include bonds and other financialassets perhaps around the world In the end we argue that whether the modelrsquosproblems reflect weaknesses in the theory or in its empirical implementation thefailure of the CAPM in empirical tests implies that most applications of the modelare invalid

We begin by outlining the logic of the CAPM focusing on its predictions aboutrisk and expected return We then review the history of empirical work and what itsays about shortcomings of the CAPM that pose challenges to be explained byalternative models

The Logic of the CAPM

The CAPM builds on the model of portfolio choice developed by HarryMarkowitz (1959) In Markowitzrsquos model an investor selects a portfolio at timet 1 that produces a stochastic return at t The model assumes investors are riskaverse and when choosing among portfolios they care only about the mean andvariance of their one-period investment return As a result investors choose ldquomean-variance-efficientrdquo portfolios in the sense that the portfolios 1) minimize thevariance of portfolio return given expected return and 2) maximize expectedreturn given variance Thus the Markowitz approach is often called a ldquomean-variance modelrdquo

The portfolio model provides an algebraic condition on asset weights in mean-variance-efficient portfolios The CAPM turns this algebraic statement into a testableprediction about the relation between risk and expected return by identifying aportfolio that must be efficient if asset prices are to clear the market of all assets

Sharpe (1964) and Lintner (1965) add two key assumptions to the Markowitzmodel to identify a portfolio that must be mean-variance-efficient The first assump-tion is complete agreement given market clearing asset prices at t 1 investors agreeon the joint distribution of asset returns from t 1 to t And this distribution is thetrue onemdashthat is it is the distribution from which the returns we use to test themodel are drawn The second assumption is that there is borrowing and lending at arisk-free rate which is the same for all investors and does not depend on the amountborrowed or lent

Figure 1 describes portfolio opportunities and tells the CAPM story Thehorizontal axis shows portfolio risk measured by the standard deviation of portfolioreturn the vertical axis shows expected return The curve abc which is called theminimum variance frontier traces combinations of expected return and risk forportfolios of risky assets that minimize return variance at different levels of ex-pected return (These portfolios do not include risk-free borrowing and lending)The tradeoff between risk and expected return for minimum variance portfolios isapparent For example an investor who wants a high expected return perhaps atpoint a must accept high volatility At point T the investor can have an interme-

26 Journal of Economic Perspectives

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diate expected return with lower volatility If there is no risk-free borrowing orlending only portfolios above b along abc are mean-variance-efficient since theseportfolios also maximize expected return given their return variances

Adding risk-free borrowing and lending turns the efficient set into a straightline Consider a portfolio that invests the proportion x of portfolio funds in arisk-free security and 1 x in some portfolio g If all funds are invested in therisk-free securitymdashthat is they are loaned at the risk-free rate of interestmdashthe resultis the point Rf in Figure 1 a portfolio with zero variance and a risk-free rate ofreturn Combinations of risk-free lending and positive investment in g plot on thestraight line between Rf and g Points to the right of g on the line representborrowing at the risk-free rate with the proceeds from the borrowing used toincrease investment in portfolio g In short portfolios that combine risk-freelending or borrowing with some risky portfolio g plot along a straight line from Rf

through g in Figure 12

2 Formally the return expected return and standard deviation of return on portfolios of the risk-freeasset f and a risky portfolio g vary with x the proportion of portfolio funds invested in f as

Rp xRf 1 xRg

ERp xRf 1 xERg

Rp 1 x Rg x 10

which together imply that the portfolios plot along the line from Rf through g in Figure 1

Figure 1Investment Opportunities

Minimum variancefrontier for risky assets

g

s(R )

a

c

b

T

E(R )

Rf

Mean-variance-efficient frontier

with a riskless asset

Eugene F Fama and Kenneth R French 27

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To obtain the mean-variance-efficient portfolios available with risk-free bor-rowing and lending one swings a line from Rf in Figure 1 up and to the left as faras possible to the tangency portfolio T We can then see that all efficient portfoliosare combinations of the risk-free asset (either risk-free borrowing or lending) anda single risky tangency portfolio T This key result is Tobinrsquos (1958) ldquoseparationtheoremrdquo

The punch line of the CAPM is now straightforward With complete agreementabout distributions of returns all investors see the same opportunity set (Figure 1)and they combine the same risky tangency portfolio T with risk-free lending orborrowing Since all investors hold the same portfolio T of risky assets it must bethe value-weight market portfolio of risky assets Specifically each risky assetrsquosweight in the tangency portfolio which we now call M (for the ldquomarketrdquo) must bethe total market value of all outstanding units of the asset divided by the totalmarket value of all risky assets In addition the risk-free rate must be set (along withthe prices of risky assets) to clear the market for risk-free borrowing and lending

In short the CAPM assumptions imply that the market portfolio M must be onthe minimum variance frontier if the asset market is to clear This means that thealgebraic relation that holds for any minimum variance portfolio must hold for themarket portfolio Specifically if there are N risky assets

Minimum Variance Condition for M ERi ERZM

ERM ERZMiM i 1 N

In this equation E(Ri) is the expected return on asset i and iM the market betaof asset i is the covariance of its return with the market return divided by thevariance of the market return

Market Beta iM covRi RM

2RM

The first term on the right-hand side of the minimum variance conditionE(RZM) is the expected return on assets that have market betas equal to zerowhich means their returns are uncorrelated with the market return The secondterm is a risk premiummdashthe market beta of asset i iM times the premium perunit of beta which is the expected market return E(RM) minus E(RZM)

Since the market beta of asset i is also the slope in the regression of its returnon the market return a common (and correct) interpretation of beta is that itmeasures the sensitivity of the assetrsquos return to variation in the market return Butthere is another interpretation of beta more in line with the spirit of the portfoliomodel that underlies the CAPM The risk of the market portfolio as measured bythe variance of its return (the denominator of iM) is a weighted average of thecovariance risks of the assets in M (the numerators of iM for different assets)


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Thus iM is the covariance risk of asset i in M measured relative to the averagecovariance risk of assets which is just the variance of the market return3 Ineconomic terms iM is proportional to the risk each dollar invested in asset icontributes to the market portfolio

The last step in the development of the Sharpe-Lintner model is to use theassumption of risk-free borrowing and lending to nail down E(RZM) the expectedreturn on zero-beta assets A risky assetrsquos return is uncorrelated with the marketreturnmdashits beta is zeromdashwhen the average of the assetrsquos covariances with thereturns on other assets just offsets the variance of the assetrsquos return Such a riskyasset is riskless in the market portfolio in the sense that it contributes nothing to thevariance of the market return

When there is risk-free borrowing and lending the expected return on assetsthat are uncorrelated with the market return E(RZM) must equal the risk-free rateRf The relation between expected return and beta then becomes the familiarSharpe-Lintner CAPM equation

Sharpe-Lintner CAPM ERi Rf ERM Rf ]iM i 1 N

In words the expected return on any asset i is the risk-free interest rate Rf plus arisk premium which is the assetrsquos market beta iM times the premium per unit ofbeta risk E(RM) Rf

Unrestricted risk-free borrowing and lending is an unrealistic assumptionFischer Black (1972) develops a version of the CAPM without risk-free borrowing orlending He shows that the CAPMrsquos key resultmdashthat the market portfolio is mean-variance-efficientmdashcan be obtained by instead allowing unrestricted short sales ofrisky assets In brief back in Figure 1 if there is no risk-free asset investors selectportfolios from along the mean-variance-efficient frontier from a to b Marketclearing prices imply that when one weights the efficient portfolios chosen byinvestors by their (positive) shares of aggregate invested wealth the resultingportfolio is the market portfolio The market portfolio is thus a portfolio of theefficient portfolios chosen by investors With unrestricted short selling of riskyassets portfolios made up of efficient portfolios are themselves efficient Thus themarket portfolio is efficient which means that the minimum variance condition forM given above holds and it is the expected return-risk relation of the Black CAPM

The relations between expected return and market beta of the Black andSharpe-Lintner versions of the CAPM differ only in terms of what each says aboutE(RZM) the expected return on assets uncorrelated with the market The Blackversion says only that E(RZM) must be less than the expected market return so the

3 Formally if xiM is the weight of asset i in the market portfolio then the variance of the portfoliorsquosreturn is

2RM CovRM RM Cov i1

N

xiMRi RM i1

N

xiMCovRi RM

The Capital Asset Pricing Model Theory and Evidence 29

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premium for beta is positive In contrast in the Sharpe-Lintner version of themodel E(RZM) must be the risk-free interest rate Rf and the premium per unit ofbeta risk is E(RM) Rf

The assumption that short selling is unrestricted is as unrealistic as unre-stricted risk-free borrowing and lending If there is no risk-free asset and short salesof risky assets are not allowed mean-variance investors still choose efficientportfoliosmdashpoints above b on the abc curve in Figure 1 But when there is no shortselling of risky assets and no risk-free asset the algebra of portfolio efficiency saysthat portfolios made up of efficient portfolios are not typically efficient This meansthat the market portfolio which is a portfolio of the efficient portfolios chosen byinvestors is not typically efficient And the CAPM relation between expected returnand market beta is lost This does not rule out predictions about expected returnand betas with respect to other efficient portfoliosmdashif theory can specify portfoliosthat must be efficient if the market is to clear But so far this has proven impossible

In short the familiar CAPM equation relating expected asset returns to theirmarket betas is just an application to the market portfolio of the relation betweenexpected return and portfolio beta that holds in any mean-variance-efficient port-folio The efficiency of the market portfolio is based on many unrealistic assump-tions including complete agreement and either unrestricted risk-free borrowingand lending or unrestricted short selling of risky assets But all interesting modelsinvolve unrealistic simplifications which is why they must be tested against data

Early Empirical Tests

Tests of the CAPM are based on three implications of the relation betweenexpected return and market beta implied by the model First expected returns onall assets are linearly related to their betas and no other variable has marginalexplanatory power Second the beta premium is positive meaning that the ex-pected return on the market portfolio exceeds the expected return on assets whosereturns are uncorrelated with the market return Third in the Sharpe-Lintnerversion of the model assets uncorrelated with the market have expected returnsequal to the risk-free interest rate and the beta premium is the expected marketreturn minus the risk-free rate Most tests of these predictions use either cross-section or time-series regressions Both approaches date to early tests of the model

Tests on Risk PremiumsThe early cross-section regression tests focus on the Sharpe-Lintner modelrsquos

predictions about the intercept and slope in the relation between expected returnand market beta The approach is to regress a cross-section of average asset returnson estimates of asset betas The model predicts that the intercept in these regres-sions is the risk-free interest rate Rf and the coefficient on beta is the expectedreturn on the market in excess of the risk-free rate E(RM) Rf

Two problems in these tests quickly became apparent First estimates of beta


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for individual assets are imprecise creating a measurement error problem whenthey are used to explain average returns Second the regression residuals havecommon sources of variation such as industry effects in average returns Positivecorrelation in the residuals produces downward bias in the usual ordinary leastsquares estimates of the standard errors of the cross-section regression slopes

To improve the precision of estimated betas researchers such as Blume(1970) Friend and Blume (1970) and Black Jensen and Scholes (1972) work withportfolios rather than individual securities Since expected returns and marketbetas combine in the same way in portfolios if the CAPM explains security returnsit also explains portfolio returns4 Estimates of beta for diversified portfolios aremore precise than estimates for individual securities Thus using portfolios incross-section regressions of average returns on betas reduces the critical errors invariables problem Grouping however shrinks the range of betas and reducesstatistical power To mitigate this problem researchers sort securities on beta whenforming portfolios the first portfolio contains securities with the lowest betas andso on up to the last portfolio with the highest beta assets This sorting procedureis now standard in empirical tests

Fama and MacBeth (1973) propose a method for addressing the inferenceproblem caused by correlation of the residuals in cross-section regressions Insteadof estimating a single cross-section regression of average monthly returns on betasthey estimate month-by-month cross-section regressions of monthly returns onbetas The times-series means of the monthly slopes and intercepts along with thestandard errors of the means are then used to test whether the average premiumfor beta is positive and whether the average return on assets uncorrelated with themarket is equal to the average risk-free interest rate In this approach the standarderrors of the average intercept and slope are determined by the month-to-monthvariation in the regression coefficients which fully captures the effects of residualcorrelation on variation in the regression coefficients but sidesteps the problem ofactually estimating the correlations The residual correlations are in effect cap-tured via repeated sampling of the regression coefficients This approach alsobecomes standard in the literature

Jensen (1968) was the first to note that the Sharpe-Lintner version of the

4 Formally if xip i 1 N are the weights for assets in some portfolio p the expected return andmarket beta for the portfolio are related to the expected returns and betas of assets as

ERp i1

N

xipERi and pM i1

N

xippM

Thus the CAPM relation between expected return and beta

ERi ERf ERM ERfiM

holds when asset i is a portfolio as well as when i is an individual security


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relation between expected return and market beta also implies a time-series re-gression test The Sharpe-Lintner CAPM says that the expected value of an assetrsquosexcess return (the assetrsquos return minus the risk-free interest rate Rit Rft) iscompletely explained by its expected CAPM risk premium (its beta times theexpected value of RMt Rft) This implies that ldquoJensenrsquos alphardquo the intercept termin the time-series regression

Time-Series Regression Rit Rft i iM RMt Rft it

is zero for each assetThe early tests firmly reject the Sharpe-Lintner version of the CAPM There is

a positive relation between beta and average return but it is too ldquoflatrdquo Recall thatin cross-section regressions the Sharpe-Lintner model predicts that the intercept isthe risk-free rate and the coefficient on beta is the expected market return in excessof the risk-free rate E(RM) Rf The regressions consistently find that theintercept is greater than the average risk-free rate (typically proxied as the returnon a one-month Treasury bill) and the coefficient on beta is less than the averageexcess market return (proxied as the average return on a portfolio of US commonstocks minus the Treasury bill rate) This is true in the early tests such as Douglas(1968) Black Jensen and Scholes (1972) Miller and Scholes (1972) Blume andFriend (1973) and Fama and MacBeth (1973) as well as in more recent cross-section regression tests like Fama and French (1992)

The evidence that the relation between beta and average return is too flat isconfirmed in time-series tests such as Friend and Blume (1970) Black Jensen andScholes (1972) and Stambaugh (1982) The intercepts in time-series regressions ofexcess asset returns on the excess market return are positive for assets with low betasand negative for assets with high betas

Figure 2 provides an updated example of the evidence In December of eachyear we estimate a preranking beta for every NYSE (1928ndash2003) AMEX (1963ndash2003) and NASDAQ (1972ndash2003) stock in the CRSP (Center for Research inSecurity Prices of the University of Chicago) database using two to five years (asavailable) of prior monthly returns5 We then form ten value-weight portfoliosbased on these preranking betas and compute their returns for the next twelvemonths We repeat this process for each year from 1928 to 2003 The result is912 monthly returns on ten beta-sorted portfolios Figure 2 plots each portfoliorsquosaverage return against its postranking beta estimated by regressing its monthlyreturns for 1928ndash2003 on the return on the CRSP value-weight portfolio of UScommon stocks

The Sharpe-Lintner CAPM predicts that the portfolios plot along a straight

5 To be included in the sample for year t a security must have market equity data (price times sharesoutstanding) for December of t 1 and CRSP must classify it as ordinary common equity Thus weexclude securities such as American Depository Receipts (ADRs) and Real Estate Investment Trusts(REITs)


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line with an intercept equal to the risk-free rate Rf and a slope equal to theexpected excess return on the market E(RM) Rf We use the average one-monthTreasury bill rate and the average excess CRSP market return for 1928ndash2003 toestimate the predicted line in Figure 2 Confirming earlier evidence the relationbetween beta and average return for the ten portfolios is much flatter than theSharpe-Lintner CAPM predicts The returns on the low beta portfolios are too highand the returns on the high beta portfolios are too low For example the predictedreturn on the portfolio with the lowest beta is 83 percent per year the actual returnis 111 percent The predicted return on the portfolio with the highest beta is168 percent per year the actual is 137 percent

Although the observed premium per unit of beta is lower than the Sharpe-Lintner model predicts the relation between average return and beta in Figure 2is roughly linear This is consistent with the Black version of the CAPM whichpredicts only that the beta premium is positive Even this less restrictive modelhowever eventually succumbs to the data

Testing Whether Market Betas Explain Expected ReturnsThe Sharpe-Lintner and Black versions of the CAPM share the prediction that

the market portfolio is mean-variance-efficient This implies that differences inexpected return across securities and portfolios are entirely explained by differ-ences in market beta other variables should add nothing to the explanation ofexpected return This prediction plays a prominent role in tests of the CAPM Inthe early work the weapon of choice is cross-section regressions

In the framework of Fama and MacBeth (1973) one simply adds predeter-mined explanatory variables to the month-by-month cross-section regressions of

Figure 2Average Annualized Monthly Return versus Beta for Value Weight PortfoliosFormed on Prior Beta 1928ndash2003

Average returnspredicted by theCAPM

056

8

10

12

14

16

18

07 09 11 13 15 17 19

Ave

rage

an

nua

lized

mon

thly

ret

urn

(

)


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returns on beta If all differences in expected return are explained by beta theaverage slopes on the additional variables should not be reliably different fromzero Clearly the trick in the cross-section regression approach is to choose specificadditional variables likely to expose any problems of the CAPM prediction thatbecause the market portfolio is efficient market betas suffice to explain expectedasset returns

For example in Fama and MacBeth (1973) the additional variables aresquared market betas (to test the prediction that the relation between expectedreturn and beta is linear) and residual variances from regressions of returns on themarket return (to test the prediction that market beta is the only measure of riskneeded to explain expected returns) These variables do not add to the explanationof average returns provided by beta Thus the results of Fama and MacBeth (1973)are consistent with the hypothesis that their market proxymdashan equal-weight port-folio of NYSE stocksmdashis on the minimum variance frontier

The hypothesis that market betas completely explain expected returns can alsobe tested using time-series regressions In the time-series regression describedabove (the excess return on asset i regressed on the excess market return) theintercept is the difference between the assetrsquos average excess return and the excessreturn predicted by the Sharpe-Lintner model that is beta times the average excessmarket return If the model holds there is no way to group assets into portfolioswhose intercepts are reliably different from zero For example the intercepts for aportfolio of stocks with high ratios of earnings to price and a portfolio of stocks withlow earning-price ratios should both be zero Thus to test the hypothesis thatmarket betas suffice to explain expected returns one estimates the time-seriesregression for a set of assets (or portfolios) and then jointly tests the vector ofregression intercepts against zero The trick in this approach is to choose theleft-hand-side assets (or portfolios) in a way likely to expose any shortcoming of theCAPM prediction that market betas suffice to explain expected asset returns

In early applications researchers use a variety of tests to determine whetherthe intercepts in a set of time-series regressions are all zero The tests have the sameasymptotic properties but there is controversy about which has the best smallsample properties Gibbons Ross and Shanken (1989) settle the debate by provid-ing an F-test on the intercepts that has exact small-sample properties They alsoshow that the test has a simple economic interpretation In effect the test con-structs a candidate for the tangency portfolio T in Figure 1 by optimally combiningthe market proxy and the left-hand-side assets of the time-series regressions Theestimator then tests whether the efficient set provided by the combination of thistangency portfolio and the risk-free asset is reliably superior to the one obtained bycombining the risk-free asset with the market proxy alone In other words theGibbons Ross and Shanken statistic tests whether the market proxy is the tangencyportfolio in the set of portfolios that can be constructed by combining the marketportfolio with the specific assets used as dependent variables in the time-seriesregressions

Enlightened by this insight of Gibbons Ross and Shanken (1989) one can see


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a similar interpretation of the cross-section regression test of whether market betassuffice to explain expected returns In this case the test is whether the additionalexplanatory variables in a cross-section regression identify patterns in the returnson the left-hand-side assets that are not explained by the assetsrsquo market betas Thisamounts to testing whether the market proxy is on the minimum variance frontierthat can be constructed using the market proxy and the left-hand-side assetsincluded in the tests

An important lesson from this discussion is that time-series and cross-sectionregressions do not strictly speaking test the CAPM What is literally tested iswhether a specific proxy for the market portfolio (typically a portfolio of UScommon stocks) is efficient in the set of portfolios that can be constructed from itand the left-hand-side assets used in the test One might conclude from this that theCAPM has never been tested and prospects for testing it are not good because1) the set of left-hand-side assets does not include all marketable assets and 2) datafor the true market portfolio of all assets are likely beyond reach (Roll 1977 moreon this later) But this criticism can be leveled at tests of any economic model whenthe tests are less than exhaustive or when they use proxies for the variables calledfor by the model

The bottom line from the early cross-section regression tests of the CAPMsuch as Fama and MacBeth (1973) and the early time-series regression tests likeGibbons (1982) and Stambaugh (1982) is that standard market proxies seem to beon the minimum variance frontier That is the central predictions of the Blackversion of the CAPM that market betas suffice to explain expected returns and thatthe risk premium for beta is positive seem to hold But the more specific predictionof the Sharpe-Lintner CAPM that the premium per unit of beta is the expectedmarket return minus the risk-free interest rate is consistently rejected

The success of the Black version of the CAPM in early tests produced aconsensus that the model is a good description of expected returns These earlyresults coupled with the modelrsquos simplicity and intuitive appeal pushed the CAPMto the forefront of finance

Recent Tests

Starting in the late 1970s empirical work appears that challenges even theBlack version of the CAPM Specifically evidence mounts that much of the varia-tion in expected return is unrelated to market beta

The first blow is Basursquos (1977) evidence that when common stocks are sortedon earnings-price ratios future returns on high EP stocks are higher than pre-dicted by the CAPM Banz (1981) documents a size effect when stocks are sortedon market capitalization (price times shares outstanding) average returns on smallstocks are higher than predicted by the CAPM Bhandari (1988) finds that highdebt-equity ratios (book value of debt over the market value of equity a measure ofleverage) are associated with returns that are too high relative to their market betas


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Finally Statman (1980) and Rosenberg Reid and Lanstein (1985) document thatstocks with high book-to-market equity ratios (BM the ratio of the book value ofa common stock to its market value) have high average returns that are notcaptured by their betas

There is a theme in the contradictions of the CAPM summarized above Ratiosinvolving stock prices have information about expected returns missed by marketbetas On reflection this is not surprising A stockrsquos price depends not only on theexpected cash flows it will provide but also on the expected returns that discountexpected cash flows back to the present Thus in principle the cross-section ofprices has information about the cross-section of expected returns (A high ex-pected return implies a high discount rate and a low price) The cross-section ofstock prices is however arbitrarily affected by differences in scale (or units) Butwith a judicious choice of scaling variable X the ratio XP can reveal differencesin the cross-section of expected stock returns Such ratios are thus prime candidatesto expose shortcomings of asset pricing modelsmdashin the case of the CAPM short-comings of the prediction that market betas suffice to explain expected returns(Ball 1978) The contradictions of the CAPM summarized above suggest thatearnings-price debt-equity and book-to-market ratios indeed play this role

Fama and French (1992) update and synthesize the evidence on the empiricalfailures of the CAPM Using the cross-section regression approach they confirmthat size earnings-price debt-equity and book-to-market ratios add to the explana-tion of expected stock returns provided by market beta Fama and French (1996)reach the same conclusion using the time-series regression approach applied toportfolios of stocks sorted on price ratios They also find that different price ratioshave much the same information about expected returns This is not surprisinggiven that price is the common driving force in the price ratios and the numeratorsare just scaling variables used to extract the information in price about expectedreturns

Fama and French (1992) also confirm the evidence (Reinganum 1981 Stam-baugh 1982 Lakonishok and Shapiro 1986) that the relation between averagereturn and beta for common stocks is even flatter after the sample periods used inthe early empirical work on the CAPM The estimate of the beta premium ishowever clouded by statistical uncertainty (a large standard error) Kothari Shan-ken and Sloan (1995) try to resuscitate the Sharpe-Lintner CAPM by arguing thatthe weak relation between average return and beta is just a chance result But thestrong evidence that other variables capture variation in expected return missed bybeta makes this argument irrelevant If betas do not suffice to explain expectedreturns the market portfolio is not efficient and the CAPM is dead in its tracksEvidence on the size of the market premium can neither save the model nor furtherdoom it

The synthesis of the evidence on the empirical problems of the CAPM pro-vided by Fama and French (1992) serves as a catalyst marking the point when it isgenerally acknowledged that the CAPM has potentially fatal problems Researchthen turns to explanations


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One possibility is that the CAPMrsquos problems are spurious the result of datadredgingmdashpublication-hungry researchers scouring the data and unearthing con-tradictions that occur in specific samples as a result of chance A standard responseto this concern is to test for similar findings in other samples Chan Hamao andLakonishok (1991) find a strong relation between book-to-market equity (BM)and average return for Japanese stocks Capaul Rowley and Sharpe (1993) observea similar BM effect in four European stock markets and in Japan Fama andFrench (1998) find that the price ratios that produce problems for the CAPM inUS data show up in the same way in the stock returns of twelve non-US majormarkets and they are present in emerging market returns This evidence suggeststhat the contradictions of the CAPM associated with price ratios are not samplespecific

Explanations Irrational Pricing or Risk

Among those who conclude that the empirical failures of the CAPM are fataltwo stories emerge On one side are the behavioralists Their view is based onevidence that stocks with high ratios of book value to market price are typicallyfirms that have fallen on bad times while low BM is associated with growth firms(Lakonishok Shleifer and Vishny 1994 Fama and French 1995) The behavior-alists argue that sorting firms on book-to-market ratios exposes investor overreac-tion to good and bad times Investors overextrapolate past performance resultingin stock prices that are too high for growth (low BM) firms and too low fordistressed (high BM so-called value) firms When the overreaction is eventuallycorrected the result is high returns for value stocks and low returns for growthstocks Proponents of this view include DeBondt and Thaler (1987) LakonishokShleifer and Vishny (1994) and Haugen (1995)

The second story for explaining the empirical contradictions of the CAPM isthat they point to the need for a more complicated asset pricing model The CAPMis based on many unrealistic assumptions For example the assumption thatinvestors care only about the mean and variance of one-period portfolio returns isextreme It is reasonable that investors also care about how their portfolio returncovaries with labor income and future investment opportunities so a portfoliorsquosreturn variance misses important dimensions of risk If so market beta is not acomplete description of an assetrsquos risk and we should not be surprised to find thatdifferences in expected return are not completely explained by differences in betaIn this view the search should turn to asset pricing models that do a better jobexplaining average returns

Mertonrsquos (1973) intertemporal capital asset pricing model (ICAPM) is anatural extension of the CAPM The ICAPM begins with a different assumptionabout investor objectives In the CAPM investors care only about the wealth theirportfolio produces at the end of the current period In the ICAPM investors areconcerned not only with their end-of-period payoff but also with the opportunities


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they will have to consume or invest the payoff Thus when choosing a portfolio attime t 1 ICAPM investors consider how their wealth at t might vary with futurestate variables including labor income the prices of consumption goods and thenature of portfolio opportunities at t and expectations about the labor incomeconsumption and investment opportunities to be available after t

Like CAPM investors ICAPM investors prefer high expected return and lowreturn variance But ICAPM investors are also concerned with the covariances ofportfolio returns with state variables As a result optimal portfolios are ldquomultifactorefficientrdquo which means they have the largest possible expected returns given theirreturn variances and the covariances of their returns with the relevant statevariables

Fama (1996) shows that the ICAPM generalizes the logic of the CAPM That isif there is risk-free borrowing and lending or if short sales of risky assets are allowedmarket clearing prices imply that the market portfolio is multifactor efficientMoreover multifactor efficiency implies a relation between expected return andbeta risks but it requires additional betas along with a market beta to explainexpected returns

An ideal implementation of the ICAPM would specify the state variables thataffect expected returns Fama and French (1993) take a more indirect approachperhaps more in the spirit of Rossrsquos (1976) arbitrage pricing theory They arguethat though size and book-to-market equity are not themselves state variables thehigher average returns on small stocks and high book-to-market stocks reflectunidentified state variables that produce undiversifiable risks (covariances) inreturns that are not captured by the market return and are priced separately frommarket betas In support of this claim they show that the returns on the stocks ofsmall firms covary more with one another than with returns on the stocks of largefirms and returns on high book-to-market (value) stocks covary more with oneanother than with returns on low book-to-market (growth) stocks Fama andFrench (1995) show that there are similar size and book-to-market patterns in thecovariation of fundamentals like earnings and sales

Based on this evidence Fama and French (1993 1996) propose a three-factormodel for expected returns

Three-Factor Model ERit Rft iM ERMt Rft

isESMBt ihEHMLt

In this equation SMBt (small minus big) is the difference between the returns ondiversified portfolios of small and big stocks HMLt (high minus low) is thedifference between the returns on diversified portfolios of high and low BMstocks and the betas are slopes in the multiple regression of Rit Rft on RMt RftSMBt and HMLt

For perspective the average value of the market premium RMt Rft for1927ndash2003 is 83 percent per year which is 35 standard errors from zero The


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average values of SMBt and HMLt are 36 percent and 50 percent per year andthey are 21 and 31 standard errors from zero All three premiums are volatile withannual standard deviations of 210 percent (RMt Rft) 146 percent (SMBt) and142 percent (HMLt) per year Although the average values of the premiums arelarge high volatility implies substantial uncertainty about the true expectedpremiums

One implication of the expected return equation of the three-factor model isthat the intercept i in the time-series regression

Rit Rft i iMRMt Rft isSMBt ihHMLt it

is zero for all assets i Using this criterion Fama and French (1993 1996) find thatthe model captures much of the variation in average return for portfolios formedon size book-to-market equity and other price ratios that cause problems for theCAPM Fama and French (1998) show that an international version of the modelperforms better than an international CAPM in describing average returns onportfolios formed on scaled price variables for stocks in 13 major markets

The three-factor model is now widely used in empirical research that requiresa model of expected returns Estimates of i from the time-series regression aboveare used to calibrate how rapidly stock prices respond to new information (forexample Loughran and Ritter 1995 Mitchell and Stafford 2000) They are alsoused to measure the special information of portfolio managers for example inCarhartrsquos (1997) study of mutual fund performance Among practitioners likeIbbotson Associates the model is offered as an alternative to the CAPM forestimating the cost of equity capital

From a theoretical perspective the main shortcoming of the three-factormodel is its empirical motivation The small-minus-big (SMB) and high-minus-low(HML) explanatory returns are not motivated by predictions about state variablesof concern to investors Instead they are brute force constructs meant to capturethe patterns uncovered by previous work on how average stock returns vary with sizeand the book-to-market equity ratio

But this concern is not fatal The ICAPM does not require that the additionalportfolios used along with the market portfolio to explain expected returnsldquomimicrdquo the relevant state variables In both the ICAPM and the arbitrage pricingtheory it suffices that the additional portfolios are well diversified (in the termi-nology of Fama 1996 they are multifactor minimum variance) and that they aresufficiently different from the market portfolio to capture covariation in returnsand variation in expected returns missed by the market portfolio Thus addingdiversified portfolios that capture covariation in returns and variation in averagereturns left unexplained by the market is in the spirit of both the ICAPM and theRossrsquos arbitrage pricing theory

The behavioralists are not impressed by the evidence for a risk-based expla-nation of the failures of the CAPM They typically concede that the three-factormodel captures covariation in returns missed by the market return and that it picks


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up much of the size and value effects in average returns left unexplained by theCAPM But their view is that the average return premium associated with themodelrsquos book-to-market factormdashwhich does the heavy lifting in the improvementsto the CAPMmdashis itself the result of investor overreaction that happens to becorrelated across firms in a way that just looks like a risk story In short in thebehavioral view the market tries to set CAPM prices and violations of the CAPMare due to mispricing

The conflict between the behavioral irrational pricing story and the rationalrisk story for the empirical failures of the CAPM leaves us at a timeworn impasseFama (1970) emphasizes that the hypothesis that prices properly reflect availableinformation must be tested in the context of a model of expected returns like theCAPM Intuitively to test whether prices are rational one must take a stand on whatthe market is trying to do in setting pricesmdashthat is what is risk and what is therelation between expected return and risk When tests reject the CAPM onecannot say whether the problem is its assumption that prices are rational (thebehavioral view) or violations of other assumptions that are also necessary toproduce the CAPM (our position)

Fortunately for some applications the way one uses the three-factor modeldoes not depend on onersquos view about whether its average return premiums are therational result of underlying state variable risks the result of irrational investorbehavior or sample specific results of chance For example when measuring theresponse of stock prices to new information or when evaluating the performance ofmanaged portfolios one wants to account for known patterns in returns andaverage returns for the period examined whatever their source Similarly whenestimating the cost of equity capital one might be unconcerned with whetherexpected return premiums are rational or irrational since they are in either casepart of the opportunity cost of equity capital (Stein 1996) But the cost of capitalis forward looking so if the premiums are sample specific they are irrelevant

The three-factor model is hardly a panacea Its most serious problem is themomentum effect of Jegadeesh and Titman (1993) Stocks that do well relative tothe market over the last three to twelve months tend to continue to do well for thenext few months and stocks that do poorly continue to do poorly This momentumeffect is distinct from the value effect captured by book-to-market equity and otherprice ratios Moreover the momentum effect is left unexplained by the three-factormodel as well as by the CAPM Following Carhart (1997) one response is to adda momentum factor (the difference between the returns on diversified portfolios ofshort-term winners and losers) to the three-factor model This step is again legiti-mate in applications where the goal is to abstract from known patterns in averagereturns to uncover information-specific or manager-specific effects But since themomentum effect is short-lived it is largely irrelevant for estimates of the cost ofequity capital

Another strand of research points to problems in both the three-factor modeland the CAPM Frankel and Lee (1998) Dechow Hutton and Sloan (1999)Piotroski (2000) and others show that in portfolios formed on price ratios like


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book-to-market equity stocks with higher expected cash flows have higher averagereturns that are not captured by the three-factor model or the CAPM The authorsinterpret their results as evidence that stock prices are irrational in the sense thatthey do not reflect available information about expected profitability

In truth however one canrsquot tell whether the problem is bad pricing or a badasset pricing model A stockrsquos price can always be expressed as the present value ofexpected future cash flows discounted at the expected return on the stock (Camp-bell and Shiller 1989 Vuolteenaho 2002) It follows that if two stocks have thesame price the one with higher expected cash flows must have a higher expectedreturn This holds true whether pricing is rational or irrational Thus when oneobserves a positive relation between expected cash flows and expected returns thatis left unexplained by the CAPM or the three-factor model one canrsquot tell whetherit is the result of irrational pricing or a misspecified asset pricing model

The Market Proxy Problem

Roll (1977) argues that the CAPM has never been tested and probably neverwill be The problem is that the market portfolio at the heart of the model istheoretically and empirically elusive It is not theoretically clear which assets (forexample human capital) can legitimately be excluded from the market portfolioand data availability substantially limits the assets that are included As a result testsof the CAPM are forced to use proxies for the market portfolio in effect testingwhether the proxies are on the minimum variance frontier Roll argues thatbecause the tests use proxies not the true market portfolio we learn nothing aboutthe CAPM

We are more pragmatic The relation between expected return and marketbeta of the CAPM is just the minimum variance condition that holds in any efficientportfolio applied to the market portfolio Thus if we can find a market proxy thatis on the minimum variance frontier it can be used to describe differences inexpected returns and we would be happy to use it for this purpose The strongrejections of the CAPM described above however say that researchers have notuncovered a reasonable market proxy that is close to the minimum variancefrontier If researchers are constrained to reasonable proxies we doubt theyever will

Our pessimism is fueled by several empirical results Stambaugh (1982) teststhe CAPM using a range of market portfolios that include in addition to UScommon stocks corporate and government bonds preferred stocks real estate andother consumer durables He finds that tests of the CAPM are not sensitive toexpanding the market proxy beyond common stocks basically because the volatilityof expanded market returns is dominated by the volatility of stock returns

One need not be convinced by Stambaughrsquos (1982) results since his marketproxies are limited to US assets If international capital markets are open and assetprices conform to an international version of the CAPM the market portfolio


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should include international assets Fama and French (1998) find however thatbetas for a global stock market portfolio cannot explain the high average returnsobserved around the world on stocks with high book-to-market or high earnings-price ratios

A major problem for the CAPM is that portfolios formed by sorting stocks onprice ratios produce a wide range of average returns but the average returns arenot positively related to market betas (Lakonishok Shleifer and Vishny 1994 Famaand French 1996 1998) The problem is illustrated in Figure 3 which showsaverage returns and betas (calculated with respect to the CRSP value-weight port-folio of NYSE AMEX and NASDAQ stocks) for July 1963 to December 2003 for tenportfolios of US stocks formed annually on sorted values of the book-to-marketequity ratio (BM)6

Average returns on the BM portfolios increase almost monotonically from101 percent per year for the lowest BM group (portfolio 1) to an impressive167 percent for the highest (portfolio 10) But the positive relation between betaand average return predicted by the CAPM is notably absent For example theportfolio with the lowest book-to-market ratio has the highest beta but the lowestaverage return The estimated beta for the portfolio with the highest book-to-market ratio and the highest average return is only 098 With an average annual-ized value of the riskfree interest rate Rf of 58 percent and an average annualizedmarket premium RM Rf of 113 percent the Sharpe-Lintner CAPM predicts anaverage return of 118 percent for the lowest BM portfolio and 112 percent forthe highest far from the observed values 101 and 167 percent For the Sharpe-Lintner model to ldquoworkrdquo on these portfolios their market betas must changedramatically from 109 to 078 for the lowest BM portfolio and from 098 to 198for the highest We judge it unlikely that alternative proxies for the marketportfolio will produce betas and a market premium that can explain the averagereturns on these portfolios

It is always possible that researchers will redeem the CAPM by finding areasonable proxy for the market portfolio that is on the minimum variance frontierWe emphasize however that this possibility cannot be used to justify the way theCAPM is currently applied The problem is that applications typically use the same

6 Stock return data are from CRSP and book equity data are from Compustat and the MoodyrsquosIndustrials Transportation Utilities and Financials manuals Stocks are allocated to ten portfolios at theend of June of each year t (1963 to 2003) using the ratio of book equity for the fiscal year ending incalendar year t 1 divided by market equity at the end of December of t 1 Book equity is the bookvalue of stockholdersrsquo equity plus balance sheet deferred taxes and investment tax credit (if available)minus the book value of preferred stock Depending on availability we use the redemption liquidationor par value (in that order) to estimate the book value of preferred stock Stockholdersrsquo equity is thevalue reported by Moodyrsquos or Compustat if it is available If not we measure stockholdersrsquo equity as thebook value of common equity plus the par value of preferred stock or the book value of assets minustotal liabilities (in that order) The portfolios for year t include NYSE (1963ndash2003) AMEX (1963ndash2003)and NASDAQ (1972ndash2003) stocks with positive book equity in t 1 and market equity (from CRSP) forDecember of t 1 and June of t The portfolios exclude securities CRSP does not classify as ordinarycommon equity The breakpoints for year t use only securities that are on the NYSE in June of year t


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market proxies like the value-weight portfolio of US stocks that lead to rejectionsof the model in empirical tests The contradictions of the CAPM observed whensuch proxies are used in tests of the model show up as bad estimates of expectedreturns in applications for example estimates of the cost of equity capital that aretoo low (relative to historical average returns) for small stocks and for stocks withhigh book-to-market equity ratios In short if a market proxy does not work in testsof the CAPM it does not work in applications

Conclusions

The version of the CAPM developed by Sharpe (1964) and Lintner (1965) hasnever been an empirical success In the early empirical work the Black (1972)version of the model which can accommodate a flatter tradeoff of average returnfor market beta has some success But in the late 1970s research begins to uncovervariables like size various price ratios and momentum that add to the explanationof average returns provided by beta The problems are serious enough to invalidatemost applications of the CAPM

For example finance textbooks often recommend using the Sharpe-LintnerCAPM risk-return relation to estimate the cost of equity capital The prescription isto estimate a stockrsquos market beta and combine it with the risk-free interest rate andthe average market risk premium to produce an estimate of the cost of equity Thetypical market portfolio in these exercises includes just US common stocks Butempirical work old and new tells us that the relation between beta and averagereturn is flatter than predicted by the Sharpe-Lintner version of the CAPM As a

Figure 3Average Annualized Monthly Return versus Beta for Value Weight PortfoliosFormed on BM 1963ndash2003

Average returnspredicted bythe CAPM

079

10

11

12

13

14

15

16

17

08

10 (highest BM)

9

6

32

1 (lowest BM)

5 4

78

09 1 11 12

Ave

rage

an

nua

lized

mon

thly

ret

urn

(

)


rmaurer
Text Box

result CAPM estimates of the cost of equity for high beta stocks are too high(relative to historical average returns) and estimates for low beta stocks are too low(Friend and Blume 1970) Similarly if the high average returns on value stocks(with high book-to-market ratios) imply high expected returns CAPM cost ofequity estimates for such stocks are too low7

The CAPM is also often used to measure the performance of mutual funds andother managed portfolios The approach dating to Jensen (1968) is to estimatethe CAPM time-series regression for a portfolio and use the intercept (Jensenrsquosalpha) to measure abnormal performance The problem is that because of theempirical failings of the CAPM even passively managed stock portfolios produceabnormal returns if their investment strategies involve tilts toward CAPM problems(Elton Gruber Das and Hlavka 1993) For example funds that concentrate on lowbeta stocks small stocks or value stocks will tend to produce positive abnormalreturns relative to the predictions of the Sharpe-Lintner CAPM even when thefund managers have no special talent for picking winners

The CAPM like Markowitzrsquos (1952 1959) portfolio model on which it is builtis nevertheless a theoretical tour de force We continue to teach the CAPM as anintroduction to the fundamental concepts of portfolio theory and asset pricing tobe built on by more complicated models like Mertonrsquos (1973) ICAPM But we alsowarn students that despite its seductive simplicity the CAPMrsquos empirical problemsprobably invalidate its use in applications

y We gratefully acknowledge the comments of John Cochrane George Constantinides RichardLeftwich Andrei Shleifer Rene Stulz and Timothy Taylor

7 The problems are compounded by the large standard errors of estimates of the market premium andof betas for individual stocks which probably suffice to make CAPM estimates of the cost of equity rathermeaningless even if the CAPM holds (Fama and French 1997 Pastor and Stambaugh 1999) Forexample using the US Treasury bill rate as the risk-free interest rate and the CRSP value-weightportfolio of publicly traded US common stocks the average value of the equity premium RMt Rft for1927ndash2003 is 83 percent per year with a standard error of 24 percent The two standard error rangethus runs from 35 percent to 131 percent which is sufficient to make most projects appear eitherprofitable or unprofitable This problem is however hardly special to the CAPM For example expectedreturns in all versions of Mertonrsquos (1973) ICAPM include a market beta and the expected marketpremium Also as noted earlier the expected values of the size and book-to-market premiums in theFama-French three-factor model are also estimated with substantial error


rmaurer
Text Box

References

Ball Ray 1978 ldquoAnomalies in RelationshipsBetween Securitiesrsquo Yields and Yield-SurrogatesrdquoJournal of Financial Economics 62 pp 103ndash26

Banz Rolf W 1981 ldquoThe Relationship Be-tween Return and Market Value of CommonStocksrdquo Journal of Financial Economics 91pp 3ndash18

Basu Sanjay 1977 ldquoInvestment Performanceof Common Stocks in Relation to Their Price-Earnings Ratios A Test of the Efficient MarketHypothesisrdquo Journal of Finance 123 pp 129ndash56

Bhandari Laxmi Chand 1988 ldquoDebtEquityRatio and Expected Common Stock ReturnsEmpirical Evidencerdquo Journal of Finance 432pp 507ndash28

Black Fischer 1972 ldquoCapital Market Equilib-rium with Restricted Borrowingrdquo Journal of Busi-ness 453 pp 444ndash54

Black Fischer Michael C Jensen and MyronScholes 1972 ldquoThe Capital Asset Pricing ModelSome Empirical Testsrdquo in Studies in the Theory ofCapital Markets Michael C Jensen ed New YorkPraeger pp 79ndash121

Blume Marshall 1970 ldquoPortfolio Theory AStep Towards its Practical Applicationrdquo Journal ofBusiness 432 pp 152ndash74

Blume Marshall and Irwin Friend 1973 ldquoANew Look at the Capital Asset Pricing ModelrdquoJournal of Finance 281 pp 19ndash33

Campbell John Y and Robert J Shiller 1989ldquoThe Dividend-Price Ratio and Expectations ofFuture Dividends and Discount Factorsrdquo Reviewof Financial Studies 13 pp 195ndash228

Capaul Carlo Ian Rowley and William FSharpe 1993 ldquoInternational Value and GrowthStock Returnsrdquo Financial Analysts JournalJanuaryFebruary 49 pp 27ndash36

Carhart Mark M 1997 ldquoOn Persistence inMutual Fund Performancerdquo Journal of Finance521 pp 57ndash82

Chan Louis KC Yasushi Hamao and JosefLakonishok 1991 ldquoFundamentals and Stock Re-turns in Japanrdquo Journal of Finance 465pp 1739ndash789

DeBondt Werner F M and Richard H Tha-ler 1987 ldquoFurther Evidence on Investor Over-reaction and Stock Market Seasonalityrdquo Journalof Finance 423 pp 557ndash81

Dechow Patricia M Amy P Hutton and Rich-ard G Sloan 1999 ldquoAn Empirical Assessment ofthe Residual Income Valuation Modelrdquo Journalof Accounting and Economics 261 pp 1ndash34

Douglas George W 1968 Risk in the EquityMarkets An Empirical Appraisal of Market Efficiency

Ann Arbor Michigan University MicrofilmsInc

Elton Edwin J Martin J Gruber Sanjiv Dasand Matt Hlavka 1993 ldquoEfficiency with CostlyInformation A Reinterpretation of Evidencefrom Managed Portfoliosrdquo Review of FinancialStudies 61 pp 1ndash22

Fama Eugene F 1970 ldquoEfficient Capital Mar-kets A Review of Theory and Empirical WorkrdquoJournal of Finance 252 pp 383ndash417

Fama Eugene F 1996 ldquoMultifactor PortfolioEfficiency and Multifactor Asset Pricingrdquo Journalof Financial and Quantitative Analysis 314pp 441ndash65

Fama Eugene F and Kenneth R French1992 ldquoThe Cross-Section of Expected Stock Re-turnsrdquo Journal of Finance 472 pp 427ndash65

Fama Eugene F and Kenneth R French1993 ldquoCommon Risk Factors in the Returns onStocks and Bondsrdquo Journal of Financial Economics331 pp 3ndash56

Fama Eugene F and Kenneth R French1995 ldquoSize and Book-to-Market Factors in Earn-ings and Returnsrdquo Journal of Finance 501pp 131ndash55

Fama Eugene F and Kenneth R French1996 ldquoMultifactor Explanations of Asset PricingAnomaliesrdquo Journal of Finance 511 pp 55ndash84

Fama Eugene F and Kenneth R French1997 ldquoIndustry Costs of Equityrdquo Journal of Finan-cial Economics 432 pp 153ndash93

Fama Eugene F and Kenneth R French1998 ldquoValue Versus Growth The InternationalEvidencerdquo Journal of Finance 536 pp 1975ndash999

Fama Eugene F and James D MacBeth 1973ldquoRisk Return and Equilibrium EmpiricalTestsrdquo Journal of Political Economy 813pp 607ndash36

Frankel Richard and Charles MC Lee 1998ldquoAccounting Valuation Market Expectationand Cross-Sectional Stock Returnsrdquo Journal ofAccounting and Economics 253 pp 283ndash319

Friend Irwin and Marshall Blume 1970ldquoMeasurement of Portfolio Performance underUncertaintyrdquo American Economic Review 604pp 607ndash36

Gibbons Michael R 1982 ldquoMultivariate Testsof Financial Models A New Approachrdquo Journalof Financial Economics 101 pp 3ndash27

Gibbons Michael R Stephen A Ross and JayShanken 1989 ldquoA Test of the Efficiency of aGiven Portfoliordquo Econometrica 575 pp 1121ndash152

Haugen Robert 1995 The New Finance The


rmaurer
Text Box

Case against Efficient Markets Englewood CliffsNJ Prentice Hall

Jegadeesh Narasimhan and Sheridan Titman1993 ldquoReturns to Buying Winners and SellingLosers Implications for Stock Market Effi-ciencyrdquo Journal of Finance 481 pp 65ndash91

Jensen Michael C 1968 ldquoThe Performance ofMutual Funds in the Period 1945ndash1964rdquo Journalof Finance 232 pp 389ndash416

Kothari S P Jay Shanken and Richard GSloan 1995 ldquoAnother Look at the Cross-Sectionof Expected Stock Returnsrdquo Journal of Finance501 pp 185ndash224

Lakonishok Josef and Alan C Shapiro 1986Systemaitc Risk Total Risk and Size as Determi-nants of Stock Market Returnsldquo Journal of Bank-ing and Finance 101 pp 115ndash32

Lakonishok Josef Andrei Shleifer and Rob-ert W Vishny 1994 ldquoContrarian InvestmentExtrapolation and Riskrdquo Journal of Finance 495pp 1541ndash578

Lintner John 1965 ldquoThe Valuation of RiskAssets and the Selection of Risky Investments inStock Portfolios and Capital Budgetsrdquo Review ofEconomics and Statistics 471 pp 13ndash37

Loughran Tim and Jay R Ritter 1995 ldquoTheNew Issues Puzzlerdquo Journal of Finance 501pp 23ndash51

Markowitz Harry 1952 ldquoPortfolio SelectionrdquoJournal of Finance 71 pp 77ndash99

Markowitz Harry 1959 Portfolio Selection Effi-cient Diversification of Investments Cowles Founda-tion Monograph No 16 New York John Wiley ampSons Inc

Merton Robert C 1973 ldquoAn IntertemporalCapital Asset Pricing Modelrdquo Econometrica 415pp 867ndash87

Miller Merton and Myron Scholes 1972ldquoRates of Return in Relation to Risk A Reexam-ination of Some Recent Findingsrdquo in Studies inthe Theory of Capital Markets Michael C Jensened New York Praeger pp 47ndash78

Mitchell Mark L and Erik Stafford 2000ldquoManagerial Decisions and Long-Term Stock

Price Performancerdquo Journal of Business 733pp 287ndash329

Pastor Lubos and Robert F Stambaugh1999 ldquoCosts of Equity Capital and Model Mis-pricingrdquo Journal of Finance 541 pp 67ndash121

Piotroski Joseph D 2000 ldquoValue InvestingThe Use of Historical Financial Statement Infor-mation to Separate Winners from Losersrdquo Jour-nal of Accounting Research 38Supplementpp 1ndash51

Reinganum Marc R 1981 ldquoA New EmpiricalPerspective on the CAPMrdquo Journal of Financialand Quantitative Analysis 164 pp 439ndash62

Roll Richard 1977 ldquoA Critique of the AssetPricing Theoryrsquos Testsrsquo Part I On Past and Po-tential Testability of the Theoryrdquo Journal of Fi-nancial Economics 42 pp 129ndash76

Rosenberg Barr Kenneth Reid and RonaldLanstein 1985 ldquoPersuasive Evidence of MarketInefficiencyrdquo Journal of Portfolio ManagementSpring 11 pp 9ndash17

Ross Stephen A 1976 ldquoThe Arbitrage Theoryof Capital Asset Pricingrdquo Journal of Economic The-ory 133 pp 341ndash60

Sharpe William F 1964 ldquoCapital Asset PricesA Theory of Market Equilibrium under Condi-tions of Riskrdquo Journal of Finance 193 pp 425ndash42

Stambaugh Robert F 1982 ldquoOn The Exclu-sion of Assets from Tests of the Two-ParameterModel A Sensitivity Analysisrdquo Journal of FinancialEconomics 103 pp 237ndash68

Stattman Dennis 1980 ldquoBook Values andStock Returnsrdquo The Chicago MBA A Journal ofSelected Papers 4 pp 25ndash45

Stein Jeremy 1996 ldquoRational Capital Budget-ing in an Irrational Worldrdquo Journal of Business694 pp 429ndash55

Tobin James 1958 ldquoLiquidity Preference asBehavior Toward Riskrdquo Review of Economic Stud-ies 252 pp 65ndash86

Vuolteenaho Tuomo 2002 ldquoWhat DrivesFirm Level Stock Returnsrdquo Journal of Finance571 pp 233ndash64


rmaurer
Text Box

Adjusted ExpectedDividend Growth Rate of

Time Period Yield(1) Rate Return(1) (2) (3=1+2)

(1) 52 Week Average 287 603 890Ending January 28 2015

(2) Spot Price 260 603 863Ending January 28 2015

(3) Average 274 603 877

Sources Value Line January 16 2015Barrons January 28 2015

Expected Market Cost Rate of Equity

Using Data for the Barometer Group of Seven Water Companies5 Year Forecasted Growth Rates

rmaurer
Text Box

Yahoo

MS

NM

oney

Morn

ing

Sta

r

Valu

eLin

e

Avera

ge

Company Symbol

American States Water Co AWR 200 200 100 650 288

Aqua America WTR 400 500 580 850 583

California Water Service Group CWT 600 600 600 750 638

Connecticut Water CTWS 500 500 NA 700 567

Middlesex Water MSEX 270 NA NA 500 385

SJW Corp SJW 1400 NA 1400 700 1167

York Water YORW 490 NA NA 700 595

603

Source

Internet

January 28 2015

Five Year Growth Estimate Forecast for Seven Company Barometer Group

Source

rmaurer
Text Box

Average

Symbol AWR WTR CWT CTWS MSEX SJW YORW

Div 090 069 067 105 077 079 06052 wk high 4170 2822 2637 3855 2368 3567 249752 wk low 2702 2312 2033 3100 1906 2546 1885Spot Price 4125 2770 2554 3726 2265 3514 2431Spot Div Yield 260 218 249 262 282 340 225 24752 wk Div Yield 287 262 269 287 302 360 258 274Average 274

Source BarronsValue Line

January 28 2015January 16 2015

Dividend Yields of Seven Company Peer Group

American StatesWater Co Aqua America

California WaterService Group

ConnecticutWater

MiddlesexWater SJW Corp York Water

rmaurer
Text Box

Company Beta

American States Water Co 070

Aqua America 070

California Water Service Group 070

Connecticut Water 065

Middlesex Water 070

SJW Corp 085

York Water 065

Average beta for CAPM 071

Source

Value Line

January 16 2015

rmaurer
Text Box

Re Required return on individual equity security

Rf Risk-free rate

Rm Required return on the market as a whole

Be Beta on individual equity security

Re = Rf+Be(Rm-Rf)

Rf = 44169

Rm = 112511

Be = 07071

Re = 925

Sources Value Line January 16 2015

Blue Chip 212015 amp 1212014

CAPM with historical return

rmaurer
Text Box

Risk Free Rate10-year Treasury Note Yield

61 Year Historic Average 551





Average 442

Sourcehttpwwwfederalreservegovreleasesh15datahtm

rmaurer
Text Box

Required Rate of Return on Market as a Whole Historic

Expected

Market

Return

5 yr SampP Composite Index Historical Return 1794





1125Average Expected Market Return =

rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 28100

Rm = 101329

Be = 07071

Re = 799


Blue Chip 212015 amp 1212014

CAPM with forecasted return

rmaurer
Text Box

Risk Free Rate

Treasury note 10-yr Note Yield

4Q 2014 228

1Q 2015 210

2Q 2015 230

3Q 2015 250

4Q 2015 270

1Q 2016 300

2Q 2016 320

2016-2020 440

Average 281

Source

Blue Chip

212015 amp 1212014

rmaurer
Text Box

Required Rate of Return on Market as a Whole Forecasted

Expected

Dividend Growth Market

Yield + Rate = Return

Value Line Estimate 200 779 (a) 979

SampP 500 210 (b) 837 1047

= 1013

(a) ((1+35)^25) -1) Value Line forecast for the 3 to 5 year index appreciation is 35

(b) SampP 500 Dividend Yield of 202 multiplied by half the growth rate

Average Expected Market Return

rmaurer
Text Box


Long term Debt 4491 528 237Common Equity 5509 1055 581

Total 10000 818

Rate Base 17702965800$

ROR Dollars 14481026$



Total 10000 796

Rate Base 17702965800$


Value of 40 BasisPoint RiskAdjustment 389465$

Without 40 Basis Point Equity Adjustment

Companys Claim

rmaurer
Text Box
rmaurer
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rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box

DOCKET R-2015-2462723 UNITED WATER PENNSYLVANIA INC OFFICE OF CONSUMER ADVOCATE

INTERROGATORIES SET VI

Witness Pauline M Ahern

OCA-VI-14

With regard to UWPA Exhibit No PMA-1 Schedule 6 please provide all data source documents and workpapers showing all computations required to develop

(a) GARCH coefficient (b) Average Predicted Variance and (c) PPRM Derived Average Risk Premium

In this response provide in sufficient detail to enable the replication of each amount Please provide in hardcopy as well as in executable electronic format Response The source documents and workpapers are contained in the responses to OCA-VI-12 and OCA-VI-13 However in order to replicate the PRPM analysis one must apply the GARCH model to the source data provided There is not an Excel function that will perform a GARCH calculation so one must purchase a statistical package such as EViews or SAS to execute the model If OCA does not have a statistical package available to them Ms Ahern can make herself and the software available so that OCA can verify the results

OCA-VI-14

rmaurer
Text Box
rmaurer
Rectangle


Long term Debt 4491 528 237

Common Equity 5509 877 483Total 10000 720


rmaurer
Text Box



























rmaurer
Text Box

Medical Services



120

240

360

480

600

720

960

1200

2012 2013 2014 20152009 2010 2011






Hospitals Heat Up










Conclusion



Erik M Manning



rmaurer
Text Box

Beverage


250


500

750

1000

2011 2013 20142008 2009 2010 2012



















Richard J Gallagher



rmaurer
Text Box

Biotechnology


1000

2000

4000

50006000

8000


10000

3000

15000

2012 2013 2014 20152009 2010 2011


















Conclusion




Nira Maharaj



rmaurer
Text Box




1500

2100

2400

2700

3000

2012 2013 2014 20152009 2010 2011

1800















Eugene Varghese



rmaurer
Text Box

Drug


225

450

900


11251125

675

2012 2013 2014 20152009 2010 2011




















Michael Ratty



rmaurer
Text Box

Environmental



150

300

450

600

750

900

1200

1500

2012 2013 2014 20152009 2010 2011















David R Cohen



rmaurer
Text Box

Food Processing


200

400

600


1000

800

2011 2013 20142008 2009 2010 2012





















Michael Lavery



rmaurer
Text Box

Household Products


40

80

120

160

200


240

320

400

2012 2013 2014 20152009 2010 2011





Cleaning House













Conclusion





Orly Seidman



rmaurer
Text Box



120

240

360


480

2012 2013 2014 20152009 2010 2011

















Alan G House



rmaurer
Text Box



40

80

120

160

200


2012 2013 2014 20152009 2010 2011
















Growth Catalysts


Conclusion




Nira Maharaj



rmaurer
Text Box



100

150

200

250

350


300

400

2012 2013 2014 20152009 2010 2011





Untimely Shares




Regulatory Changes



Dividend Payers


Conclusion


Adam J Platt



rmaurer
Text Box





30

600

120

300

2012 2013 2014 20152009 2010 2011

1000

60

















Conclusion


Wilkeiy Tan



rmaurer
Text Box



10

20

30

40

50

60


80

100

2012 2013 2014 20152009 2010 2011















Conclusion



Adam Rosner



rmaurer
Text Box



20

40

100


200

120

60

80

160

2012 2013 2014 20152009 2010 2011




The Housing Market








The Niche Retailers



Conclusion





rmaurer
Text Box

Retail (Softlines)


50

100


200

75

150

2011 2013 20142008 2009 2010 2012


















J Susan Ferrara



rmaurer
Text Box



120

240

360


480

2011 2013 20142008 2009 2010 2012
















Robert M Greene CFA



rmaurer
Text Box

Thrift


20

120

160


40

60

80

100

200

2012 2013 2014 20152009 2010 201110






















Robert Mitkowski Jr



rmaurer
Text Box




10000 10000 10000 10000 10000Aqua America






10000 10000 10000 10000 10000Middlesex Water


10000 10000 10000 10000 10000SJW Corp


10000 10000 10000 10000 10000York Water


10000 10000 10000 10000 10000


5 Year Average


Source Compustat


rmaurer
Text Box

Water Utility


700


300

600

400

500

2012 2013 20142008 2009 2010 2011




















Conclusion



James A Flood



rmaurer
Text Box

Interest

Charges

Long-term

Debt

Debt

Cost


Aqua America 77754 146858 529




SJW Corp 20827 33500 622

York Water 5244 8489 618

Low 350High 725

Average 570

Source Compustat

2013

Range

rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box









rmaurer
Text Box









rmaurer
Text Box





Rp xRf 1 xRg

ERp xRf 1 xERg

Rp 1 x Rg x 10




g

s(R )

a

c

b

T

E(R )

Rf




rmaurer
Text Box





ERM ERZMiM i 1 N



2RM




rmaurer
Text Box









2RM CovRM RM Cov i1

N

xiMRi RM i1

N

xiMCovRi RM


rmaurer
Text Box










rmaurer
Text Box






ERp i1

N

xipERi and pM i1

N

xippM


ERi ERf ERM ERfiM



rmaurer
Text Box










rmaurer
Text Box








056

8

10

12

14

16

18

07 09 11 13 15 17 19

Ave

rage

an

nua

lized

mon

thly

ret

urn

(

)


rmaurer
Text Box







rmaurer
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Recent Tests




rmaurer
Text Box







rmaurer
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rmaurer
Text Box







isESMBt ihEHMLt




rmaurer
Text Box










rmaurer
Text Box







rmaurer
Text Box









rmaurer
Text Box







rmaurer
Text Box


Conclusions





079

10

11

12

13

14

15

16

17

08

10 (highest BM)

9

6

32

1 (lowest BM)

5 4

78

09 1 11 12

Ave

rage

an

nua

lized

mon

thly

ret

urn

(

)


rmaurer
Text Box







rmaurer
Text Box

References

































rmaurer
Text Box




























rmaurer
Text Box





(3) Average 274 603 877




rmaurer
Text Box

Yahoo

MS

NM

oney

Morn

ing

Sta

r

Valu

eLin

e

Avera

ge

Company Symbol


Aqua America WTR 400 500 580 850 583




SJW Corp SJW 1400 NA 1400 700 1167


603

Source

Internet

January 28 2015


Source

rmaurer
Text Box

Average








ConnecticutWater


rmaurer
Text Box

Company Beta


Aqua America 070



Middlesex Water 070

SJW Corp 085

York Water 065


Source

Value Line

January 16 2015

rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 44169

Rm = 112511

Be = 07071

Re = 925


Blue Chip 212015 amp 1212014


rmaurer
Text Box







Average 442


rmaurer
Text Box


Expected

Market

Return







rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 28100

Rm = 101329

Be = 07071

Re = 799


Blue Chip 212015 amp 1212014


rmaurer
Text Box

Risk Free Rate


4Q 2014 228

1Q 2015 210

2Q 2015 230

3Q 2015 250

4Q 2015 270

1Q 2016 300

2Q 2016 320

2016-2020 440

Average 281

Source

Blue Chip

212015 amp 1212014

rmaurer
Text Box


Expected




SampP 500 210 (b) 837 1047

= 1013




rmaurer
Text Box



Total 10000 818

Rate Base 17702965800$




Total 10000 796

Rate Base 17702965800$




Companys Claim

rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box




OCA-VI-14




OCA-VI-14

rmaurer
Text Box
rmaurer
Rectangle



























rmaurer
Text Box

Medical Services



120

240

360

480

600

720

960

1200

2012 2013 2014 20152009 2010 2011






Hospitals Heat Up










Conclusion



Erik M Manning



rmaurer
Text Box

Beverage


250


500

750

1000

2011 2013 20142008 2009 2010 2012



















Richard J Gallagher



rmaurer
Text Box

Biotechnology


1000

2000

4000

50006000

8000


10000

3000

15000

2012 2013 2014 20152009 2010 2011


















Conclusion




Nira Maharaj



rmaurer
Text Box




1500

2100

2400

2700

3000

2012 2013 2014 20152009 2010 2011

1800















Eugene Varghese



rmaurer
Text Box

Drug


225

450

900


11251125

675

2012 2013 2014 20152009 2010 2011




















Michael Ratty



rmaurer
Text Box

Environmental



150

300

450

600

750

900

1200

1500

2012 2013 2014 20152009 2010 2011















David R Cohen



rmaurer
Text Box

Food Processing


200

400

600


1000

800

2011 2013 20142008 2009 2010 2012





















Michael Lavery



rmaurer
Text Box

Household Products


40

80

120

160

200


240

320

400

2012 2013 2014 20152009 2010 2011





Cleaning House













Conclusion





Orly Seidman



rmaurer
Text Box



120

240

360


480

2012 2013 2014 20152009 2010 2011

















Alan G House



rmaurer
Text Box



40

80

120

160

200


2012 2013 2014 20152009 2010 2011
















Growth Catalysts


Conclusion




Nira Maharaj



rmaurer
Text Box



100

150

200

250

350


300

400

2012 2013 2014 20152009 2010 2011





Untimely Shares




Regulatory Changes



Dividend Payers


Conclusion


Adam J Platt



rmaurer
Text Box





30

600

120

300

2012 2013 2014 20152009 2010 2011

1000

60

















Conclusion


Wilkeiy Tan



rmaurer
Text Box



10

20

30

40

50

60


80

100

2012 2013 2014 20152009 2010 2011















Conclusion



Adam Rosner



rmaurer
Text Box



20

40

100


200

120

60

80

160

2012 2013 2014 20152009 2010 2011




The Housing Market








The Niche Retailers



Conclusion





rmaurer
Text Box

Retail (Softlines)


50

100


200

75

150

2011 2013 20142008 2009 2010 2012


















J Susan Ferrara



rmaurer
Text Box



120

240

360


480

2011 2013 20142008 2009 2010 2012
















Robert M Greene CFA



rmaurer
Text Box

Thrift


20

120

160


40

60

80

100

200

2012 2013 2014 20152009 2010 201110






















Robert Mitkowski Jr



rmaurer
Text Box




10000 10000 10000 10000 10000Aqua America






10000 10000 10000 10000 10000Middlesex Water


10000 10000 10000 10000 10000SJW Corp


10000 10000 10000 10000 10000York Water


10000 10000 10000 10000 10000


5 Year Average


Source Compustat


rmaurer
Text Box

Water Utility


700


300

600

400

500

2012 2013 20142008 2009 2010 2011




















Conclusion



James A Flood



rmaurer
Text Box

Interest

Charges

Long-term

Debt

Debt

Cost


Aqua America 77754 146858 529




SJW Corp 20827 33500 622

York Water 5244 8489 618

Low 350High 725

Average 570

Source Compustat

2013

Range

rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box









rmaurer
Text Box









rmaurer
Text Box





Rp xRf 1 xRg

ERp xRf 1 xERg

Rp 1 x Rg x 10




g

s(R )

a

c

b

T

E(R )

Rf




rmaurer
Text Box





ERM ERZMiM i 1 N



2RM




rmaurer
Text Box









2RM CovRM RM Cov i1

N

xiMRi RM i1

N

xiMCovRi RM


rmaurer
Text Box










rmaurer
Text Box






ERp i1

N

xipERi and pM i1

N

xippM


ERi ERf ERM ERfiM



rmaurer
Text Box










rmaurer
Text Box








056

8

10

12

14

16

18

07 09 11 13 15 17 19

Ave

rage

an

nua

lized

mon

thly

ret

urn

(

)


rmaurer
Text Box







rmaurer
Text Box





Recent Tests




rmaurer
Text Box







rmaurer
Text Box







rmaurer
Text Box







isESMBt ihEHMLt




rmaurer
Text Box










rmaurer
Text Box







rmaurer
Text Box









rmaurer
Text Box







rmaurer
Text Box


Conclusions





079

10

11

12

13

14

15

16

17

08

10 (highest BM)

9

6

32

1 (lowest BM)

5 4

78

09 1 11 12

Ave

rage

an

nua

lized

mon

thly

ret

urn

(

)


rmaurer
Text Box







rmaurer
Text Box

References

































rmaurer
Text Box




























rmaurer
Text Box





(3) Average 274 603 877




rmaurer
Text Box

Yahoo

MS

NM

oney

Morn

ing

Sta

r

Valu

eLin

e

Avera

ge

Company Symbol


Aqua America WTR 400 500 580 850 583




SJW Corp SJW 1400 NA 1400 700 1167


603

Source

Internet

January 28 2015


Source

rmaurer
Text Box

Average








ConnecticutWater


rmaurer
Text Box

Company Beta


Aqua America 070



Middlesex Water 070

SJW Corp 085

York Water 065


Source

Value Line

January 16 2015

rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 44169

Rm = 112511

Be = 07071

Re = 925


Blue Chip 212015 amp 1212014


rmaurer
Text Box







Average 442


rmaurer
Text Box


Expected

Market

Return







rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 28100

Rm = 101329

Be = 07071

Re = 799


Blue Chip 212015 amp 1212014


rmaurer
Text Box

Risk Free Rate


4Q 2014 228

1Q 2015 210

2Q 2015 230

3Q 2015 250

4Q 2015 270

1Q 2016 300

2Q 2016 320

2016-2020 440

Average 281

Source

Blue Chip

212015 amp 1212014

rmaurer
Text Box


Expected




SampP 500 210 (b) 837 1047

= 1013




rmaurer
Text Box



Total 10000 818

Rate Base 17702965800$




Total 10000 796

Rate Base 17702965800$




Companys Claim

rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box




OCA-VI-14




OCA-VI-14

rmaurer
Text Box
rmaurer
Rectangle

Medical Services



120

240

360

480

600

720

960

1200

2012 2013 2014 20152009 2010 2011






Hospitals Heat Up










Conclusion



Erik M Manning



rmaurer
Text Box

Beverage


250


500

750

1000

2011 2013 20142008 2009 2010 2012



















Richard J Gallagher



rmaurer
Text Box

Biotechnology


1000

2000

4000

50006000

8000


10000

3000

15000

2012 2013 2014 20152009 2010 2011


















Conclusion




Nira Maharaj



rmaurer
Text Box




1500

2100

2400

2700

3000

2012 2013 2014 20152009 2010 2011

1800















Eugene Varghese



rmaurer
Text Box

Drug


225

450

900


11251125

675

2012 2013 2014 20152009 2010 2011




















Michael Ratty



rmaurer
Text Box

Environmental



150

300

450

600

750

900

1200

1500

2012 2013 2014 20152009 2010 2011















David R Cohen



rmaurer
Text Box

Food Processing


200

400

600


1000

800

2011 2013 20142008 2009 2010 2012





















Michael Lavery



rmaurer
Text Box

Household Products


40

80

120

160

200


240

320

400

2012 2013 2014 20152009 2010 2011





Cleaning House













Conclusion





Orly Seidman



rmaurer
Text Box



120

240

360


480

2012 2013 2014 20152009 2010 2011

















Alan G House



rmaurer
Text Box



40

80

120

160

200


2012 2013 2014 20152009 2010 2011
















Growth Catalysts


Conclusion




Nira Maharaj



rmaurer
Text Box



100

150

200

250

350


300

400

2012 2013 2014 20152009 2010 2011





Untimely Shares




Regulatory Changes



Dividend Payers


Conclusion


Adam J Platt



rmaurer
Text Box





30

600

120

300

2012 2013 2014 20152009 2010 2011

1000

60

















Conclusion


Wilkeiy Tan



rmaurer
Text Box



10

20

30

40

50

60


80

100

2012 2013 2014 20152009 2010 2011















Conclusion



Adam Rosner



rmaurer
Text Box



20

40

100


200

120

60

80

160

2012 2013 2014 20152009 2010 2011




The Housing Market








The Niche Retailers



Conclusion





rmaurer
Text Box

Retail (Softlines)


50

100


200

75

150

2011 2013 20142008 2009 2010 2012


















J Susan Ferrara



rmaurer
Text Box



120

240

360


480

2011 2013 20142008 2009 2010 2012
















Robert M Greene CFA



rmaurer
Text Box

Thrift


20

120

160


40

60

80

100

200

2012 2013 2014 20152009 2010 201110






















Robert Mitkowski Jr



rmaurer
Text Box




10000 10000 10000 10000 10000Aqua America






10000 10000 10000 10000 10000Middlesex Water


10000 10000 10000 10000 10000SJW Corp


10000 10000 10000 10000 10000York Water


10000 10000 10000 10000 10000


5 Year Average


Source Compustat


rmaurer
Text Box

Water Utility


700


300

600

400

500

2012 2013 20142008 2009 2010 2011




















Conclusion



James A Flood



rmaurer
Text Box

Interest

Charges

Long-term

Debt

Debt

Cost


Aqua America 77754 146858 529




SJW Corp 20827 33500 622

York Water 5244 8489 618

Low 350High 725

Average 570

Source Compustat

2013

Range

rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box









rmaurer
Text Box









rmaurer
Text Box





Rp xRf 1 xRg

ERp xRf 1 xERg

Rp 1 x Rg x 10




g

s(R )

a

c

b

T

E(R )

Rf




rmaurer
Text Box





ERM ERZMiM i 1 N



2RM




rmaurer
Text Box









2RM CovRM RM Cov i1

N

xiMRi RM i1

N

xiMCovRi RM


rmaurer
Text Box










rmaurer
Text Box






ERp i1

N

xipERi and pM i1

N

xippM


ERi ERf ERM ERfiM



rmaurer
Text Box










rmaurer
Text Box








056

8

10

12

14

16

18

07 09 11 13 15 17 19

Ave

rage

an

nua

lized

mon

thly

ret

urn

(

)


rmaurer
Text Box







rmaurer
Text Box





Recent Tests




rmaurer
Text Box







rmaurer
Text Box







rmaurer
Text Box







isESMBt ihEHMLt




rmaurer
Text Box










rmaurer
Text Box







rmaurer
Text Box









rmaurer
Text Box







rmaurer
Text Box


Conclusions





079

10

11

12

13

14

15

16

17

08

10 (highest BM)

9

6

32

1 (lowest BM)

5 4

78

09 1 11 12

Ave

rage

an

nua

lized

mon

thly

ret

urn

(

)


rmaurer
Text Box







rmaurer
Text Box

References

































rmaurer
Text Box




























rmaurer
Text Box





(3) Average 274 603 877




rmaurer
Text Box

Yahoo

MS

NM

oney

Morn

ing

Sta

r

Valu

eLin

e

Avera

ge

Company Symbol


Aqua America WTR 400 500 580 850 583




SJW Corp SJW 1400 NA 1400 700 1167


603

Source

Internet

January 28 2015


Source

rmaurer
Text Box

Average








ConnecticutWater


rmaurer
Text Box

Company Beta


Aqua America 070



Middlesex Water 070

SJW Corp 085

York Water 065


Source

Value Line

January 16 2015

rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 44169

Rm = 112511

Be = 07071

Re = 925


Blue Chip 212015 amp 1212014


rmaurer
Text Box







Average 442


rmaurer
Text Box


Expected

Market

Return







rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 28100

Rm = 101329

Be = 07071

Re = 799


Blue Chip 212015 amp 1212014


rmaurer
Text Box

Risk Free Rate


4Q 2014 228

1Q 2015 210

2Q 2015 230

3Q 2015 250

4Q 2015 270

1Q 2016 300

2Q 2016 320

2016-2020 440

Average 281

Source

Blue Chip

212015 amp 1212014

rmaurer
Text Box


Expected




SampP 500 210 (b) 837 1047

= 1013




rmaurer
Text Box



Total 10000 818

Rate Base 17702965800$




Total 10000 796

Rate Base 17702965800$




Companys Claim

rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box




OCA-VI-14




OCA-VI-14

rmaurer
Text Box
rmaurer
Rectangle

Beverage


250


500

750

1000

2011 2013 20142008 2009 2010 2012



















Richard J Gallagher



rmaurer
Text Box

Biotechnology


1000

2000

4000

50006000

8000


10000

3000

15000

2012 2013 2014 20152009 2010 2011


















Conclusion




Nira Maharaj



rmaurer
Text Box




1500

2100

2400

2700

3000

2012 2013 2014 20152009 2010 2011

1800















Eugene Varghese



rmaurer
Text Box

Drug


225

450

900


11251125

675

2012 2013 2014 20152009 2010 2011




















Michael Ratty



rmaurer
Text Box

Environmental



150

300

450

600

750

900

1200

1500

2012 2013 2014 20152009 2010 2011















David R Cohen



rmaurer
Text Box

Food Processing


200

400

600


1000

800

2011 2013 20142008 2009 2010 2012





















Michael Lavery



rmaurer
Text Box

Household Products


40

80

120

160

200


240

320

400

2012 2013 2014 20152009 2010 2011





Cleaning House













Conclusion





Orly Seidman



rmaurer
Text Box



120

240

360


480

2012 2013 2014 20152009 2010 2011

















Alan G House



rmaurer
Text Box



40

80

120

160

200


2012 2013 2014 20152009 2010 2011
















Growth Catalysts


Conclusion




Nira Maharaj



rmaurer
Text Box



100

150

200

250

350


300

400

2012 2013 2014 20152009 2010 2011





Untimely Shares




Regulatory Changes



Dividend Payers


Conclusion


Adam J Platt



rmaurer
Text Box





30

600

120

300

2012 2013 2014 20152009 2010 2011

1000

60

















Conclusion


Wilkeiy Tan



rmaurer
Text Box



10

20

30

40

50

60


80

100

2012 2013 2014 20152009 2010 2011















Conclusion



Adam Rosner



rmaurer
Text Box



20

40

100


200

120

60

80

160

2012 2013 2014 20152009 2010 2011




The Housing Market








The Niche Retailers



Conclusion





rmaurer
Text Box

Retail (Softlines)


50

100


200

75

150

2011 2013 20142008 2009 2010 2012


















J Susan Ferrara



rmaurer
Text Box



120

240

360


480

2011 2013 20142008 2009 2010 2012
















Robert M Greene CFA



rmaurer
Text Box

Thrift


20

120

160


40

60

80

100

200

2012 2013 2014 20152009 2010 201110






















Robert Mitkowski Jr



rmaurer
Text Box




10000 10000 10000 10000 10000Aqua America






10000 10000 10000 10000 10000Middlesex Water


10000 10000 10000 10000 10000SJW Corp


10000 10000 10000 10000 10000York Water


10000 10000 10000 10000 10000


5 Year Average


Source Compustat


rmaurer
Text Box

Water Utility


700


300

600

400

500

2012 2013 20142008 2009 2010 2011




















Conclusion



James A Flood



rmaurer
Text Box

Interest

Charges

Long-term

Debt

Debt

Cost


Aqua America 77754 146858 529




SJW Corp 20827 33500 622

York Water 5244 8489 618

Low 350High 725

Average 570

Source Compustat

2013

Range

rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box









rmaurer
Text Box









rmaurer
Text Box





Rp xRf 1 xRg

ERp xRf 1 xERg

Rp 1 x Rg x 10




g

s(R )

a

c

b

T

E(R )

Rf




rmaurer
Text Box





ERM ERZMiM i 1 N



2RM




rmaurer
Text Box









2RM CovRM RM Cov i1

N

xiMRi RM i1

N

xiMCovRi RM


rmaurer
Text Box










rmaurer
Text Box






ERp i1

N

xipERi and pM i1

N

xippM


ERi ERf ERM ERfiM



rmaurer
Text Box










rmaurer
Text Box








056

8

10

12

14

16

18

07 09 11 13 15 17 19

Ave

rage

an

nua

lized

mon

thly

ret

urn

(

)


rmaurer
Text Box







rmaurer
Text Box





Recent Tests




rmaurer
Text Box







rmaurer
Text Box







rmaurer
Text Box







isESMBt ihEHMLt




rmaurer
Text Box










rmaurer
Text Box







rmaurer
Text Box









rmaurer
Text Box







rmaurer
Text Box


Conclusions





079

10

11

12

13

14

15

16

17

08

10 (highest BM)

9

6

32

1 (lowest BM)

5 4

78

09 1 11 12

Ave

rage

an

nua

lized

mon

thly

ret

urn

(

)


rmaurer
Text Box







rmaurer
Text Box

References

































rmaurer
Text Box




























rmaurer
Text Box





(3) Average 274 603 877




rmaurer
Text Box

Yahoo

MS

NM

oney

Morn

ing

Sta

r

Valu

eLin

e

Avera

ge

Company Symbol


Aqua America WTR 400 500 580 850 583




SJW Corp SJW 1400 NA 1400 700 1167


603

Source

Internet

January 28 2015


Source

rmaurer
Text Box

Average








ConnecticutWater


rmaurer
Text Box

Company Beta


Aqua America 070



Middlesex Water 070

SJW Corp 085

York Water 065


Source

Value Line

January 16 2015

rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 44169

Rm = 112511

Be = 07071

Re = 925


Blue Chip 212015 amp 1212014


rmaurer
Text Box







Average 442


rmaurer
Text Box


Expected

Market

Return







rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 28100

Rm = 101329

Be = 07071

Re = 799


Blue Chip 212015 amp 1212014


rmaurer
Text Box

Risk Free Rate


4Q 2014 228

1Q 2015 210

2Q 2015 230

3Q 2015 250

4Q 2015 270

1Q 2016 300

2Q 2016 320

2016-2020 440

Average 281

Source

Blue Chip

212015 amp 1212014

rmaurer
Text Box


Expected




SampP 500 210 (b) 837 1047

= 1013




rmaurer
Text Box



Total 10000 818

Rate Base 17702965800$




Total 10000 796

Rate Base 17702965800$




Companys Claim

rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box




OCA-VI-14




OCA-VI-14

rmaurer
Text Box
rmaurer
Rectangle

Biotechnology


1000

2000

4000

50006000

8000


10000

3000

15000

2012 2013 2014 20152009 2010 2011


















Conclusion




Nira Maharaj



rmaurer
Text Box




1500

2100

2400

2700

3000

2012 2013 2014 20152009 2010 2011

1800















Eugene Varghese



rmaurer
Text Box

Drug


225

450

900


11251125

675

2012 2013 2014 20152009 2010 2011




















Michael Ratty



rmaurer
Text Box

Environmental



150

300

450

600

750

900

1200

1500

2012 2013 2014 20152009 2010 2011















David R Cohen



rmaurer
Text Box

Food Processing


200

400

600


1000

800

2011 2013 20142008 2009 2010 2012





















Michael Lavery



rmaurer
Text Box

Household Products


40

80

120

160

200


240

320

400

2012 2013 2014 20152009 2010 2011





Cleaning House













Conclusion





Orly Seidman



rmaurer
Text Box



120

240

360


480

2012 2013 2014 20152009 2010 2011

















Alan G House



rmaurer
Text Box



40

80

120

160

200


2012 2013 2014 20152009 2010 2011
















Growth Catalysts


Conclusion




Nira Maharaj



rmaurer
Text Box



100

150

200

250

350


300

400

2012 2013 2014 20152009 2010 2011





Untimely Shares




Regulatory Changes



Dividend Payers


Conclusion


Adam J Platt



rmaurer
Text Box





30

600

120

300

2012 2013 2014 20152009 2010 2011

1000

60

















Conclusion


Wilkeiy Tan



rmaurer
Text Box



10

20

30

40

50

60


80

100

2012 2013 2014 20152009 2010 2011















Conclusion



Adam Rosner



rmaurer
Text Box



20

40

100


200

120

60

80

160

2012 2013 2014 20152009 2010 2011




The Housing Market








The Niche Retailers



Conclusion





rmaurer
Text Box

Retail (Softlines)


50

100


200

75

150

2011 2013 20142008 2009 2010 2012


















J Susan Ferrara



rmaurer
Text Box



120

240

360


480

2011 2013 20142008 2009 2010 2012
















Robert M Greene CFA



rmaurer
Text Box

Thrift


20

120

160


40

60

80

100

200

2012 2013 2014 20152009 2010 201110






















Robert Mitkowski Jr



rmaurer
Text Box




10000 10000 10000 10000 10000Aqua America






10000 10000 10000 10000 10000Middlesex Water


10000 10000 10000 10000 10000SJW Corp


10000 10000 10000 10000 10000York Water


10000 10000 10000 10000 10000


5 Year Average


Source Compustat


rmaurer
Text Box

Water Utility


700


300

600

400

500

2012 2013 20142008 2009 2010 2011




















Conclusion



James A Flood



rmaurer
Text Box

Interest

Charges

Long-term

Debt

Debt

Cost


Aqua America 77754 146858 529




SJW Corp 20827 33500 622

York Water 5244 8489 618

Low 350High 725

Average 570

Source Compustat

2013

Range

rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box









rmaurer
Text Box









rmaurer
Text Box





Rp xRf 1 xRg

ERp xRf 1 xERg

Rp 1 x Rg x 10




g

s(R )

a

c

b

T

E(R )

Rf




rmaurer
Text Box





ERM ERZMiM i 1 N



2RM




rmaurer
Text Box









2RM CovRM RM Cov i1

N

xiMRi RM i1

N

xiMCovRi RM


rmaurer
Text Box










rmaurer
Text Box






ERp i1

N

xipERi and pM i1

N

xippM


ERi ERf ERM ERfiM



rmaurer
Text Box










rmaurer
Text Box








056

8

10

12

14

16

18

07 09 11 13 15 17 19

Ave

rage

an

nua

lized

mon

thly

ret

urn

(

)


rmaurer
Text Box







rmaurer
Text Box





Recent Tests




rmaurer
Text Box







rmaurer
Text Box







rmaurer
Text Box







isESMBt ihEHMLt




rmaurer
Text Box










rmaurer
Text Box







rmaurer
Text Box









rmaurer
Text Box







rmaurer
Text Box


Conclusions





079

10

11

12

13

14

15

16

17

08

10 (highest BM)

9

6

32

1 (lowest BM)

5 4

78

09 1 11 12

Ave

rage

an

nua

lized

mon

thly

ret

urn

(

)


rmaurer
Text Box







rmaurer
Text Box

References

































rmaurer
Text Box




























rmaurer
Text Box





(3) Average 274 603 877




rmaurer
Text Box

Yahoo

MS

NM

oney

Morn

ing

Sta

r

Valu

eLin

e

Avera

ge

Company Symbol


Aqua America WTR 400 500 580 850 583




SJW Corp SJW 1400 NA 1400 700 1167


603

Source

Internet

January 28 2015


Source

rmaurer
Text Box

Average








ConnecticutWater


rmaurer
Text Box

Company Beta


Aqua America 070



Middlesex Water 070

SJW Corp 085

York Water 065


Source

Value Line

January 16 2015

rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 44169

Rm = 112511

Be = 07071

Re = 925


Blue Chip 212015 amp 1212014


rmaurer
Text Box







Average 442


rmaurer
Text Box


Expected

Market

Return







rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 28100

Rm = 101329

Be = 07071

Re = 799


Blue Chip 212015 amp 1212014


rmaurer
Text Box

Risk Free Rate


4Q 2014 228

1Q 2015 210

2Q 2015 230

3Q 2015 250

4Q 2015 270

1Q 2016 300

2Q 2016 320

2016-2020 440

Average 281

Source

Blue Chip

212015 amp 1212014

rmaurer
Text Box


Expected




SampP 500 210 (b) 837 1047

= 1013




rmaurer
Text Box



Total 10000 818

Rate Base 17702965800$




Total 10000 796

Rate Base 17702965800$




Companys Claim

rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box




OCA-VI-14




OCA-VI-14

rmaurer
Text Box
rmaurer
Rectangle




1500

2100

2400

2700

3000

2012 2013 2014 20152009 2010 2011

1800















Eugene Varghese



rmaurer
Text Box

Drug


225

450

900


11251125

675

2012 2013 2014 20152009 2010 2011




















Michael Ratty



rmaurer
Text Box

Environmental



150

300

450

600

750

900

1200

1500

2012 2013 2014 20152009 2010 2011















David R Cohen



rmaurer
Text Box

Food Processing


200

400

600


1000

800

2011 2013 20142008 2009 2010 2012





















Michael Lavery



rmaurer
Text Box

Household Products


40

80

120

160

200


240

320

400

2012 2013 2014 20152009 2010 2011





Cleaning House













Conclusion





Orly Seidman



rmaurer
Text Box



120

240

360


480

2012 2013 2014 20152009 2010 2011

















Alan G House



rmaurer
Text Box



40

80

120

160

200


2012 2013 2014 20152009 2010 2011
















Growth Catalysts


Conclusion




Nira Maharaj



rmaurer
Text Box



100

150

200

250

350


300

400

2012 2013 2014 20152009 2010 2011





Untimely Shares




Regulatory Changes



Dividend Payers


Conclusion


Adam J Platt



rmaurer
Text Box





30

600

120

300

2012 2013 2014 20152009 2010 2011

1000

60

















Conclusion


Wilkeiy Tan



rmaurer
Text Box



10

20

30

40

50

60


80

100

2012 2013 2014 20152009 2010 2011















Conclusion



Adam Rosner



rmaurer
Text Box



20

40

100


200

120

60

80

160

2012 2013 2014 20152009 2010 2011




The Housing Market








The Niche Retailers



Conclusion





rmaurer
Text Box

Retail (Softlines)


50

100


200

75

150

2011 2013 20142008 2009 2010 2012


















J Susan Ferrara



rmaurer
Text Box



120

240

360


480

2011 2013 20142008 2009 2010 2012
















Robert M Greene CFA



rmaurer
Text Box

Thrift


20

120

160


40

60

80

100

200

2012 2013 2014 20152009 2010 201110






















Robert Mitkowski Jr



rmaurer
Text Box




10000 10000 10000 10000 10000Aqua America






10000 10000 10000 10000 10000Middlesex Water


10000 10000 10000 10000 10000SJW Corp


10000 10000 10000 10000 10000York Water


10000 10000 10000 10000 10000


5 Year Average


Source Compustat


rmaurer
Text Box

Water Utility


700


300

600

400

500

2012 2013 20142008 2009 2010 2011




















Conclusion



James A Flood



rmaurer
Text Box

Interest

Charges

Long-term

Debt

Debt

Cost


Aqua America 77754 146858 529




SJW Corp 20827 33500 622

York Water 5244 8489 618

Low 350High 725

Average 570

Source Compustat

2013

Range

rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box









rmaurer
Text Box









rmaurer
Text Box





Rp xRf 1 xRg

ERp xRf 1 xERg

Rp 1 x Rg x 10




g

s(R )

a

c

b

T

E(R )

Rf




rmaurer
Text Box





ERM ERZMiM i 1 N



2RM




rmaurer
Text Box









2RM CovRM RM Cov i1

N

xiMRi RM i1

N

xiMCovRi RM


rmaurer
Text Box










rmaurer
Text Box






ERp i1

N

xipERi and pM i1

N

xippM


ERi ERf ERM ERfiM



rmaurer
Text Box










rmaurer
Text Box








056

8

10

12

14

16

18

07 09 11 13 15 17 19

Ave

rage

an

nua

lized

mon

thly

ret

urn

(

)


rmaurer
Text Box







rmaurer
Text Box





Recent Tests




rmaurer
Text Box







rmaurer
Text Box







rmaurer
Text Box







isESMBt ihEHMLt




rmaurer
Text Box










rmaurer
Text Box







rmaurer
Text Box









rmaurer
Text Box







rmaurer
Text Box


Conclusions





079

10

11

12

13

14

15

16

17

08

10 (highest BM)

9

6

32

1 (lowest BM)

5 4

78

09 1 11 12

Ave

rage

an

nua

lized

mon

thly

ret

urn

(

)


rmaurer
Text Box







rmaurer
Text Box

References

































rmaurer
Text Box




























rmaurer
Text Box





(3) Average 274 603 877




rmaurer
Text Box

Yahoo

MS

NM

oney

Morn

ing

Sta

r

Valu

eLin

e

Avera

ge

Company Symbol


Aqua America WTR 400 500 580 850 583




SJW Corp SJW 1400 NA 1400 700 1167


603

Source

Internet

January 28 2015


Source

rmaurer
Text Box

Average








ConnecticutWater


rmaurer
Text Box

Company Beta


Aqua America 070



Middlesex Water 070

SJW Corp 085

York Water 065


Source

Value Line

January 16 2015

rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 44169

Rm = 112511

Be = 07071

Re = 925


Blue Chip 212015 amp 1212014


rmaurer
Text Box







Average 442


rmaurer
Text Box


Expected

Market

Return







rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 28100

Rm = 101329

Be = 07071

Re = 799


Blue Chip 212015 amp 1212014


rmaurer
Text Box

Risk Free Rate


4Q 2014 228

1Q 2015 210

2Q 2015 230

3Q 2015 250

4Q 2015 270

1Q 2016 300

2Q 2016 320

2016-2020 440

Average 281

Source

Blue Chip

212015 amp 1212014

rmaurer
Text Box


Expected




SampP 500 210 (b) 837 1047

= 1013




rmaurer
Text Box



Total 10000 818

Rate Base 17702965800$




Total 10000 796

Rate Base 17702965800$




Companys Claim

rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box




OCA-VI-14




OCA-VI-14

rmaurer
Text Box
rmaurer
Rectangle

Drug


225

450

900


11251125

675

2012 2013 2014 20152009 2010 2011




















Michael Ratty



rmaurer
Text Box

Environmental



150

300

450

600

750

900

1200

1500

2012 2013 2014 20152009 2010 2011















David R Cohen



rmaurer
Text Box

Food Processing


200

400

600


1000

800

2011 2013 20142008 2009 2010 2012





















Michael Lavery



rmaurer
Text Box

Household Products


40

80

120

160

200


240

320

400

2012 2013 2014 20152009 2010 2011





Cleaning House













Conclusion





Orly Seidman



rmaurer
Text Box



120

240

360


480

2012 2013 2014 20152009 2010 2011

















Alan G House



rmaurer
Text Box



40

80

120

160

200


2012 2013 2014 20152009 2010 2011
















Growth Catalysts


Conclusion




Nira Maharaj



rmaurer
Text Box



100

150

200

250

350


300

400

2012 2013 2014 20152009 2010 2011





Untimely Shares




Regulatory Changes



Dividend Payers


Conclusion


Adam J Platt



rmaurer
Text Box





30

600

120

300

2012 2013 2014 20152009 2010 2011

1000

60

















Conclusion


Wilkeiy Tan



rmaurer
Text Box



10

20

30

40

50

60


80

100

2012 2013 2014 20152009 2010 2011















Conclusion



Adam Rosner



rmaurer
Text Box



20

40

100


200

120

60

80

160

2012 2013 2014 20152009 2010 2011




The Housing Market








The Niche Retailers



Conclusion





rmaurer
Text Box

Retail (Softlines)


50

100


200

75

150

2011 2013 20142008 2009 2010 2012


















J Susan Ferrara



rmaurer
Text Box



120

240

360


480

2011 2013 20142008 2009 2010 2012
















Robert M Greene CFA



rmaurer
Text Box

Thrift


20

120

160


40

60

80

100

200

2012 2013 2014 20152009 2010 201110






















Robert Mitkowski Jr



rmaurer
Text Box




10000 10000 10000 10000 10000Aqua America






10000 10000 10000 10000 10000Middlesex Water


10000 10000 10000 10000 10000SJW Corp


10000 10000 10000 10000 10000York Water


10000 10000 10000 10000 10000


5 Year Average


Source Compustat


rmaurer
Text Box

Water Utility


700


300

600

400

500

2012 2013 20142008 2009 2010 2011




















Conclusion



James A Flood



rmaurer
Text Box

Interest

Charges

Long-term

Debt

Debt

Cost


Aqua America 77754 146858 529




SJW Corp 20827 33500 622

York Water 5244 8489 618

Low 350High 725

Average 570

Source Compustat

2013

Range

rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box









rmaurer
Text Box









rmaurer
Text Box





Rp xRf 1 xRg

ERp xRf 1 xERg

Rp 1 x Rg x 10




g

s(R )

a

c

b

T

E(R )

Rf




rmaurer
Text Box





ERM ERZMiM i 1 N



2RM




rmaurer
Text Box









2RM CovRM RM Cov i1

N

xiMRi RM i1

N

xiMCovRi RM


rmaurer
Text Box










rmaurer
Text Box






ERp i1

N

xipERi and pM i1

N

xippM


ERi ERf ERM ERfiM



rmaurer
Text Box










rmaurer
Text Box








056

8

10

12

14

16

18

07 09 11 13 15 17 19

Ave

rage

an

nua

lized

mon

thly

ret

urn

(

)


rmaurer
Text Box







rmaurer
Text Box





Recent Tests




rmaurer
Text Box







rmaurer
Text Box







rmaurer
Text Box







isESMBt ihEHMLt




rmaurer
Text Box










rmaurer
Text Box







rmaurer
Text Box









rmaurer
Text Box







rmaurer
Text Box


Conclusions





079

10

11

12

13

14

15

16

17

08

10 (highest BM)

9

6

32

1 (lowest BM)

5 4

78

09 1 11 12

Ave

rage

an

nua

lized

mon

thly

ret

urn

(

)


rmaurer
Text Box







rmaurer
Text Box

References

































rmaurer
Text Box




























rmaurer
Text Box





(3) Average 274 603 877




rmaurer
Text Box

Yahoo

MS

NM

oney

Morn

ing

Sta

r

Valu

eLin

e

Avera

ge

Company Symbol


Aqua America WTR 400 500 580 850 583




SJW Corp SJW 1400 NA 1400 700 1167


603

Source

Internet

January 28 2015


Source

rmaurer
Text Box

Average








ConnecticutWater


rmaurer
Text Box

Company Beta


Aqua America 070



Middlesex Water 070

SJW Corp 085

York Water 065


Source

Value Line

January 16 2015

rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 44169

Rm = 112511

Be = 07071

Re = 925


Blue Chip 212015 amp 1212014


rmaurer
Text Box







Average 442


rmaurer
Text Box


Expected

Market

Return







rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 28100

Rm = 101329

Be = 07071

Re = 799


Blue Chip 212015 amp 1212014


rmaurer
Text Box

Risk Free Rate


4Q 2014 228

1Q 2015 210

2Q 2015 230

3Q 2015 250

4Q 2015 270

1Q 2016 300

2Q 2016 320

2016-2020 440

Average 281

Source

Blue Chip

212015 amp 1212014

rmaurer
Text Box


Expected




SampP 500 210 (b) 837 1047

= 1013




rmaurer
Text Box



Total 10000 818

Rate Base 17702965800$




Total 10000 796

Rate Base 17702965800$




Companys Claim

rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box




OCA-VI-14




OCA-VI-14

rmaurer
Text Box
rmaurer
Rectangle

Environmental



150

300

450

600

750

900

1200

1500

2012 2013 2014 20152009 2010 2011















David R Cohen



rmaurer
Text Box

Food Processing


200

400

600


1000

800

2011 2013 20142008 2009 2010 2012





















Michael Lavery



rmaurer
Text Box

Household Products


40

80

120

160

200


240

320

400

2012 2013 2014 20152009 2010 2011





Cleaning House













Conclusion





Orly Seidman



rmaurer
Text Box



120

240

360


480

2012 2013 2014 20152009 2010 2011

















Alan G House



rmaurer
Text Box



40

80

120

160

200


2012 2013 2014 20152009 2010 2011
















Growth Catalysts


Conclusion




Nira Maharaj



rmaurer
Text Box



100

150

200

250

350


300

400

2012 2013 2014 20152009 2010 2011





Untimely Shares




Regulatory Changes



Dividend Payers


Conclusion


Adam J Platt



rmaurer
Text Box





30

600

120

300

2012 2013 2014 20152009 2010 2011

1000

60

















Conclusion


Wilkeiy Tan



rmaurer
Text Box



10

20

30

40

50

60


80

100

2012 2013 2014 20152009 2010 2011















Conclusion



Adam Rosner



rmaurer
Text Box



20

40

100


200

120

60

80

160

2012 2013 2014 20152009 2010 2011




The Housing Market








The Niche Retailers



Conclusion





rmaurer
Text Box

Retail (Softlines)


50

100


200

75

150

2011 2013 20142008 2009 2010 2012


















J Susan Ferrara



rmaurer
Text Box



120

240

360


480

2011 2013 20142008 2009 2010 2012
















Robert M Greene CFA



rmaurer
Text Box

Thrift


20

120

160


40

60

80

100

200

2012 2013 2014 20152009 2010 201110






















Robert Mitkowski Jr



rmaurer
Text Box




10000 10000 10000 10000 10000Aqua America






10000 10000 10000 10000 10000Middlesex Water


10000 10000 10000 10000 10000SJW Corp


10000 10000 10000 10000 10000York Water


10000 10000 10000 10000 10000


5 Year Average


Source Compustat


rmaurer
Text Box

Water Utility


700


300

600

400

500

2012 2013 20142008 2009 2010 2011




















Conclusion



James A Flood



rmaurer
Text Box

Interest

Charges

Long-term

Debt

Debt

Cost


Aqua America 77754 146858 529




SJW Corp 20827 33500 622

York Water 5244 8489 618

Low 350High 725

Average 570

Source Compustat

2013

Range

rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box









rmaurer
Text Box









rmaurer
Text Box





Rp xRf 1 xRg

ERp xRf 1 xERg

Rp 1 x Rg x 10




g

s(R )

a

c

b

T

E(R )

Rf




rmaurer
Text Box





ERM ERZMiM i 1 N



2RM




rmaurer
Text Box









2RM CovRM RM Cov i1

N

xiMRi RM i1

N

xiMCovRi RM


rmaurer
Text Box










rmaurer
Text Box






ERp i1

N

xipERi and pM i1

N

xippM


ERi ERf ERM ERfiM



rmaurer
Text Box










rmaurer
Text Box








056

8

10

12

14

16

18

07 09 11 13 15 17 19

Ave

rage

an

nua

lized

mon

thly

ret

urn

(

)


rmaurer
Text Box







rmaurer
Text Box





Recent Tests




rmaurer
Text Box







rmaurer
Text Box







rmaurer
Text Box







isESMBt ihEHMLt




rmaurer
Text Box










rmaurer
Text Box







rmaurer
Text Box









rmaurer
Text Box







rmaurer
Text Box


Conclusions





079

10

11

12

13

14

15

16

17

08

10 (highest BM)

9

6

32

1 (lowest BM)

5 4

78

09 1 11 12

Ave

rage

an

nua

lized

mon

thly

ret

urn

(

)


rmaurer
Text Box







rmaurer
Text Box

References

































rmaurer
Text Box




























rmaurer
Text Box





(3) Average 274 603 877




rmaurer
Text Box

Yahoo

MS

NM

oney

Morn

ing

Sta

r

Valu

eLin

e

Avera

ge

Company Symbol


Aqua America WTR 400 500 580 850 583




SJW Corp SJW 1400 NA 1400 700 1167


603

Source

Internet

January 28 2015


Source

rmaurer
Text Box

Average








ConnecticutWater


rmaurer
Text Box

Company Beta


Aqua America 070



Middlesex Water 070

SJW Corp 085

York Water 065


Source

Value Line

January 16 2015

rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 44169

Rm = 112511

Be = 07071

Re = 925


Blue Chip 212015 amp 1212014


rmaurer
Text Box







Average 442


rmaurer
Text Box


Expected

Market

Return







rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 28100

Rm = 101329

Be = 07071

Re = 799


Blue Chip 212015 amp 1212014


rmaurer
Text Box

Risk Free Rate


4Q 2014 228

1Q 2015 210

2Q 2015 230

3Q 2015 250

4Q 2015 270

1Q 2016 300

2Q 2016 320

2016-2020 440

Average 281

Source

Blue Chip

212015 amp 1212014

rmaurer
Text Box


Expected




SampP 500 210 (b) 837 1047

= 1013




rmaurer
Text Box



Total 10000 818

Rate Base 17702965800$




Total 10000 796

Rate Base 17702965800$




Companys Claim

rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box




OCA-VI-14




OCA-VI-14

rmaurer
Text Box
rmaurer
Rectangle

Food Processing


200

400

600


1000

800

2011 2013 20142008 2009 2010 2012





















Michael Lavery



rmaurer
Text Box

Household Products


40

80

120

160

200


240

320

400

2012 2013 2014 20152009 2010 2011





Cleaning House













Conclusion





Orly Seidman



rmaurer
Text Box



120

240

360


480

2012 2013 2014 20152009 2010 2011

















Alan G House



rmaurer
Text Box



40

80

120

160

200


2012 2013 2014 20152009 2010 2011
















Growth Catalysts


Conclusion




Nira Maharaj



rmaurer
Text Box



100

150

200

250

350


300

400

2012 2013 2014 20152009 2010 2011





Untimely Shares




Regulatory Changes



Dividend Payers


Conclusion


Adam J Platt



rmaurer
Text Box





30

600

120

300

2012 2013 2014 20152009 2010 2011

1000

60

















Conclusion


Wilkeiy Tan



rmaurer
Text Box



10

20

30

40

50

60


80

100

2012 2013 2014 20152009 2010 2011















Conclusion



Adam Rosner



rmaurer
Text Box



20

40

100


200

120

60

80

160

2012 2013 2014 20152009 2010 2011




The Housing Market








The Niche Retailers



Conclusion





rmaurer
Text Box

Retail (Softlines)


50

100


200

75

150

2011 2013 20142008 2009 2010 2012


















J Susan Ferrara



rmaurer
Text Box



120

240

360


480

2011 2013 20142008 2009 2010 2012
















Robert M Greene CFA



rmaurer
Text Box

Thrift


20

120

160


40

60

80

100

200

2012 2013 2014 20152009 2010 201110






















Robert Mitkowski Jr



rmaurer
Text Box




10000 10000 10000 10000 10000Aqua America






10000 10000 10000 10000 10000Middlesex Water


10000 10000 10000 10000 10000SJW Corp


10000 10000 10000 10000 10000York Water


10000 10000 10000 10000 10000


5 Year Average


Source Compustat


rmaurer
Text Box

Water Utility


700


300

600

400

500

2012 2013 20142008 2009 2010 2011




















Conclusion



James A Flood



rmaurer
Text Box

Interest

Charges

Long-term

Debt

Debt

Cost


Aqua America 77754 146858 529




SJW Corp 20827 33500 622

York Water 5244 8489 618

Low 350High 725

Average 570

Source Compustat

2013

Range

rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box









rmaurer
Text Box









rmaurer
Text Box





Rp xRf 1 xRg

ERp xRf 1 xERg

Rp 1 x Rg x 10




g

s(R )

a

c

b

T

E(R )

Rf




rmaurer
Text Box





ERM ERZMiM i 1 N



2RM




rmaurer
Text Box









2RM CovRM RM Cov i1

N

xiMRi RM i1

N

xiMCovRi RM


rmaurer
Text Box










rmaurer
Text Box






ERp i1

N

xipERi and pM i1

N

xippM


ERi ERf ERM ERfiM



rmaurer
Text Box










rmaurer
Text Box








056

8

10

12

14

16

18

07 09 11 13 15 17 19

Ave

rage

an

nua

lized

mon

thly

ret

urn

(

)


rmaurer
Text Box







rmaurer
Text Box





Recent Tests




rmaurer
Text Box







rmaurer
Text Box







rmaurer
Text Box







isESMBt ihEHMLt




rmaurer
Text Box










rmaurer
Text Box







rmaurer
Text Box









rmaurer
Text Box







rmaurer
Text Box


Conclusions





079

10

11

12

13

14

15

16

17

08

10 (highest BM)

9

6

32

1 (lowest BM)

5 4

78

09 1 11 12

Ave

rage

an

nua

lized

mon

thly

ret

urn

(

)


rmaurer
Text Box







rmaurer
Text Box

References

































rmaurer
Text Box




























rmaurer
Text Box





(3) Average 274 603 877




rmaurer
Text Box

Yahoo

MS

NM

oney

Morn

ing

Sta

r

Valu

eLin

e

Avera

ge

Company Symbol


Aqua America WTR 400 500 580 850 583




SJW Corp SJW 1400 NA 1400 700 1167


603

Source

Internet

January 28 2015


Source

rmaurer
Text Box

Average








ConnecticutWater


rmaurer
Text Box

Company Beta


Aqua America 070



Middlesex Water 070

SJW Corp 085

York Water 065


Source

Value Line

January 16 2015

rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 44169

Rm = 112511

Be = 07071

Re = 925


Blue Chip 212015 amp 1212014


rmaurer
Text Box







Average 442


rmaurer
Text Box


Expected

Market

Return







rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 28100

Rm = 101329

Be = 07071

Re = 799


Blue Chip 212015 amp 1212014


rmaurer
Text Box

Risk Free Rate


4Q 2014 228

1Q 2015 210

2Q 2015 230

3Q 2015 250

4Q 2015 270

1Q 2016 300

2Q 2016 320

2016-2020 440

Average 281

Source

Blue Chip

212015 amp 1212014

rmaurer
Text Box


Expected




SampP 500 210 (b) 837 1047

= 1013




rmaurer
Text Box



Total 10000 818

Rate Base 17702965800$




Total 10000 796

Rate Base 17702965800$




Companys Claim

rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box




OCA-VI-14




OCA-VI-14

rmaurer
Text Box
rmaurer
Rectangle

Household Products


40

80

120

160

200


240

320

400

2012 2013 2014 20152009 2010 2011





Cleaning House













Conclusion





Orly Seidman



rmaurer
Text Box



120

240

360


480

2012 2013 2014 20152009 2010 2011

















Alan G House



rmaurer
Text Box



40

80

120

160

200


2012 2013 2014 20152009 2010 2011
















Growth Catalysts


Conclusion




Nira Maharaj



rmaurer
Text Box



100

150

200

250

350


300

400

2012 2013 2014 20152009 2010 2011





Untimely Shares




Regulatory Changes



Dividend Payers


Conclusion


Adam J Platt



rmaurer
Text Box





30

600

120

300

2012 2013 2014 20152009 2010 2011

1000

60

















Conclusion


Wilkeiy Tan



rmaurer
Text Box



10

20

30

40

50

60


80

100

2012 2013 2014 20152009 2010 2011















Conclusion



Adam Rosner



rmaurer
Text Box



20

40

100


200

120

60

80

160

2012 2013 2014 20152009 2010 2011




The Housing Market








The Niche Retailers



Conclusion





rmaurer
Text Box

Retail (Softlines)


50

100


200

75

150

2011 2013 20142008 2009 2010 2012


















J Susan Ferrara



rmaurer
Text Box



120

240

360


480

2011 2013 20142008 2009 2010 2012
















Robert M Greene CFA



rmaurer
Text Box

Thrift


20

120

160


40

60

80

100

200

2012 2013 2014 20152009 2010 201110






















Robert Mitkowski Jr



rmaurer
Text Box




10000 10000 10000 10000 10000Aqua America






10000 10000 10000 10000 10000Middlesex Water


10000 10000 10000 10000 10000SJW Corp


10000 10000 10000 10000 10000York Water


10000 10000 10000 10000 10000


5 Year Average


Source Compustat


rmaurer
Text Box

Water Utility


700


300

600

400

500

2012 2013 20142008 2009 2010 2011




















Conclusion



James A Flood



rmaurer
Text Box

Interest

Charges

Long-term

Debt

Debt

Cost


Aqua America 77754 146858 529




SJW Corp 20827 33500 622

York Water 5244 8489 618

Low 350High 725

Average 570

Source Compustat

2013

Range

rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box









rmaurer
Text Box









rmaurer
Text Box





Rp xRf 1 xRg

ERp xRf 1 xERg

Rp 1 x Rg x 10




g

s(R )

a

c

b

T

E(R )

Rf




rmaurer
Text Box





ERM ERZMiM i 1 N



2RM




rmaurer
Text Box









2RM CovRM RM Cov i1

N

xiMRi RM i1

N

xiMCovRi RM


rmaurer
Text Box










rmaurer
Text Box






ERp i1

N

xipERi and pM i1

N

xippM


ERi ERf ERM ERfiM



rmaurer
Text Box










rmaurer
Text Box








056

8

10

12

14

16

18

07 09 11 13 15 17 19

Ave

rage

an

nua

lized

mon

thly

ret

urn

(

)


rmaurer
Text Box







rmaurer
Text Box





Recent Tests




rmaurer
Text Box







rmaurer
Text Box







rmaurer
Text Box







isESMBt ihEHMLt




rmaurer
Text Box










rmaurer
Text Box







rmaurer
Text Box









rmaurer
Text Box







rmaurer
Text Box


Conclusions





079

10

11

12

13

14

15

16

17

08

10 (highest BM)

9

6

32

1 (lowest BM)

5 4

78

09 1 11 12

Ave

rage

an

nua

lized

mon

thly

ret

urn

(

)


rmaurer
Text Box







rmaurer
Text Box

References

































rmaurer
Text Box




























rmaurer
Text Box





(3) Average 274 603 877




rmaurer
Text Box

Yahoo

MS

NM

oney

Morn

ing

Sta

r

Valu

eLin

e

Avera

ge

Company Symbol


Aqua America WTR 400 500 580 850 583




SJW Corp SJW 1400 NA 1400 700 1167


603

Source

Internet

January 28 2015


Source

rmaurer
Text Box

Average








ConnecticutWater


rmaurer
Text Box

Company Beta


Aqua America 070



Middlesex Water 070

SJW Corp 085

York Water 065


Source

Value Line

January 16 2015

rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 44169

Rm = 112511

Be = 07071

Re = 925


Blue Chip 212015 amp 1212014


rmaurer
Text Box







Average 442


rmaurer
Text Box


Expected

Market

Return







rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 28100

Rm = 101329

Be = 07071

Re = 799


Blue Chip 212015 amp 1212014


rmaurer
Text Box

Risk Free Rate


4Q 2014 228

1Q 2015 210

2Q 2015 230

3Q 2015 250

4Q 2015 270

1Q 2016 300

2Q 2016 320

2016-2020 440

Average 281

Source

Blue Chip

212015 amp 1212014

rmaurer
Text Box


Expected




SampP 500 210 (b) 837 1047

= 1013




rmaurer
Text Box



Total 10000 818

Rate Base 17702965800$




Total 10000 796

Rate Base 17702965800$




Companys Claim

rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box




OCA-VI-14




OCA-VI-14

rmaurer
Text Box
rmaurer
Rectangle



120

240

360


480

2012 2013 2014 20152009 2010 2011

















Alan G House



rmaurer
Text Box



40

80

120

160

200


2012 2013 2014 20152009 2010 2011
















Growth Catalysts


Conclusion




Nira Maharaj



rmaurer
Text Box



100

150

200

250

350


300

400

2012 2013 2014 20152009 2010 2011





Untimely Shares




Regulatory Changes



Dividend Payers


Conclusion


Adam J Platt



rmaurer
Text Box





30

600

120

300

2012 2013 2014 20152009 2010 2011

1000

60

















Conclusion


Wilkeiy Tan



rmaurer
Text Box



10

20

30

40

50

60


80

100

2012 2013 2014 20152009 2010 2011















Conclusion



Adam Rosner



rmaurer
Text Box



20

40

100


200

120

60

80

160

2012 2013 2014 20152009 2010 2011




The Housing Market








The Niche Retailers



Conclusion





rmaurer
Text Box

Retail (Softlines)


50

100


200

75

150

2011 2013 20142008 2009 2010 2012


















J Susan Ferrara



rmaurer
Text Box



120

240

360


480

2011 2013 20142008 2009 2010 2012
















Robert M Greene CFA



rmaurer
Text Box

Thrift


20

120

160


40

60

80

100

200

2012 2013 2014 20152009 2010 201110






















Robert Mitkowski Jr



rmaurer
Text Box




10000 10000 10000 10000 10000Aqua America






10000 10000 10000 10000 10000Middlesex Water


10000 10000 10000 10000 10000SJW Corp


10000 10000 10000 10000 10000York Water


10000 10000 10000 10000 10000


5 Year Average


Source Compustat


rmaurer
Text Box

Water Utility


700


300

600

400

500

2012 2013 20142008 2009 2010 2011




















Conclusion



James A Flood



rmaurer
Text Box

Interest

Charges

Long-term

Debt

Debt

Cost


Aqua America 77754 146858 529




SJW Corp 20827 33500 622

York Water 5244 8489 618

Low 350High 725

Average 570

Source Compustat

2013

Range

rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box









rmaurer
Text Box









rmaurer
Text Box





Rp xRf 1 xRg

ERp xRf 1 xERg

Rp 1 x Rg x 10




g

s(R )

a

c

b

T

E(R )

Rf




rmaurer
Text Box





ERM ERZMiM i 1 N



2RM




rmaurer
Text Box









2RM CovRM RM Cov i1

N

xiMRi RM i1

N

xiMCovRi RM


rmaurer
Text Box










rmaurer
Text Box






ERp i1

N

xipERi and pM i1

N

xippM


ERi ERf ERM ERfiM



rmaurer
Text Box










rmaurer
Text Box








056

8

10

12

14

16

18

07 09 11 13 15 17 19

Ave

rage

an

nua

lized

mon

thly

ret

urn

(

)


rmaurer
Text Box







rmaurer
Text Box





Recent Tests




rmaurer
Text Box







rmaurer
Text Box







rmaurer
Text Box







isESMBt ihEHMLt




rmaurer
Text Box










rmaurer
Text Box







rmaurer
Text Box









rmaurer
Text Box







rmaurer
Text Box


Conclusions





079

10

11

12

13

14

15

16

17

08

10 (highest BM)

9

6

32

1 (lowest BM)

5 4

78

09 1 11 12

Ave

rage

an

nua

lized

mon

thly

ret

urn

(

)


rmaurer
Text Box







rmaurer
Text Box

References

































rmaurer
Text Box




























rmaurer
Text Box





(3) Average 274 603 877




rmaurer
Text Box

Yahoo

MS

NM

oney

Morn

ing

Sta

r

Valu

eLin

e

Avera

ge

Company Symbol


Aqua America WTR 400 500 580 850 583




SJW Corp SJW 1400 NA 1400 700 1167


603

Source

Internet

January 28 2015


Source

rmaurer
Text Box

Average








ConnecticutWater


rmaurer
Text Box

Company Beta


Aqua America 070



Middlesex Water 070

SJW Corp 085

York Water 065


Source

Value Line

January 16 2015

rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 44169

Rm = 112511

Be = 07071

Re = 925


Blue Chip 212015 amp 1212014


rmaurer
Text Box







Average 442


rmaurer
Text Box


Expected

Market

Return







rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 28100

Rm = 101329

Be = 07071

Re = 799


Blue Chip 212015 amp 1212014


rmaurer
Text Box

Risk Free Rate


4Q 2014 228

1Q 2015 210

2Q 2015 230

3Q 2015 250

4Q 2015 270

1Q 2016 300

2Q 2016 320

2016-2020 440

Average 281

Source

Blue Chip

212015 amp 1212014

rmaurer
Text Box


Expected




SampP 500 210 (b) 837 1047

= 1013




rmaurer
Text Box



Total 10000 818

Rate Base 17702965800$




Total 10000 796

Rate Base 17702965800$




Companys Claim

rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box




OCA-VI-14




OCA-VI-14

rmaurer
Text Box
rmaurer
Rectangle



40

80

120

160

200


2012 2013 2014 20152009 2010 2011
















Growth Catalysts


Conclusion




Nira Maharaj



rmaurer
Text Box



100

150

200

250

350


300

400

2012 2013 2014 20152009 2010 2011





Untimely Shares




Regulatory Changes



Dividend Payers


Conclusion


Adam J Platt



rmaurer
Text Box





30

600

120

300

2012 2013 2014 20152009 2010 2011

1000

60

















Conclusion


Wilkeiy Tan



rmaurer
Text Box



10

20

30

40

50

60


80

100

2012 2013 2014 20152009 2010 2011















Conclusion



Adam Rosner



rmaurer
Text Box



20

40

100


200

120

60

80

160

2012 2013 2014 20152009 2010 2011




The Housing Market








The Niche Retailers



Conclusion





rmaurer
Text Box

Retail (Softlines)


50

100


200

75

150

2011 2013 20142008 2009 2010 2012


















J Susan Ferrara



rmaurer
Text Box



120

240

360


480

2011 2013 20142008 2009 2010 2012
















Robert M Greene CFA



rmaurer
Text Box

Thrift


20

120

160


40

60

80

100

200

2012 2013 2014 20152009 2010 201110






















Robert Mitkowski Jr



rmaurer
Text Box




10000 10000 10000 10000 10000Aqua America






10000 10000 10000 10000 10000Middlesex Water


10000 10000 10000 10000 10000SJW Corp


10000 10000 10000 10000 10000York Water


10000 10000 10000 10000 10000


5 Year Average


Source Compustat


rmaurer
Text Box

Water Utility


700


300

600

400

500

2012 2013 20142008 2009 2010 2011




















Conclusion



James A Flood



rmaurer
Text Box

Interest

Charges

Long-term

Debt

Debt

Cost


Aqua America 77754 146858 529




SJW Corp 20827 33500 622

York Water 5244 8489 618

Low 350High 725

Average 570

Source Compustat

2013

Range

rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box









rmaurer
Text Box









rmaurer
Text Box





Rp xRf 1 xRg

ERp xRf 1 xERg

Rp 1 x Rg x 10




g

s(R )

a

c

b

T

E(R )

Rf




rmaurer
Text Box





ERM ERZMiM i 1 N



2RM




rmaurer
Text Box









2RM CovRM RM Cov i1

N

xiMRi RM i1

N

xiMCovRi RM


rmaurer
Text Box










rmaurer
Text Box






ERp i1

N

xipERi and pM i1

N

xippM


ERi ERf ERM ERfiM



rmaurer
Text Box










rmaurer
Text Box








056

8

10

12

14

16

18

07 09 11 13 15 17 19

Ave

rage

an

nua

lized

mon

thly

ret

urn

(

)


rmaurer
Text Box







rmaurer
Text Box





Recent Tests




rmaurer
Text Box







rmaurer
Text Box







rmaurer
Text Box







isESMBt ihEHMLt




rmaurer
Text Box










rmaurer
Text Box







rmaurer
Text Box









rmaurer
Text Box







rmaurer
Text Box


Conclusions





079

10

11

12

13

14

15

16

17

08

10 (highest BM)

9

6

32

1 (lowest BM)

5 4

78

09 1 11 12

Ave

rage

an

nua

lized

mon

thly

ret

urn

(

)


rmaurer
Text Box







rmaurer
Text Box

References

































rmaurer
Text Box




























rmaurer
Text Box





(3) Average 274 603 877




rmaurer
Text Box

Yahoo

MS

NM

oney

Morn

ing

Sta

r

Valu

eLin

e

Avera

ge

Company Symbol


Aqua America WTR 400 500 580 850 583




SJW Corp SJW 1400 NA 1400 700 1167


603

Source

Internet

January 28 2015


Source

rmaurer
Text Box

Average








ConnecticutWater


rmaurer
Text Box

Company Beta


Aqua America 070



Middlesex Water 070

SJW Corp 085

York Water 065


Source

Value Line

January 16 2015

rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 44169

Rm = 112511

Be = 07071

Re = 925


Blue Chip 212015 amp 1212014


rmaurer
Text Box







Average 442


rmaurer
Text Box


Expected

Market

Return







rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 28100

Rm = 101329

Be = 07071

Re = 799


Blue Chip 212015 amp 1212014


rmaurer
Text Box

Risk Free Rate


4Q 2014 228

1Q 2015 210

2Q 2015 230

3Q 2015 250

4Q 2015 270

1Q 2016 300

2Q 2016 320

2016-2020 440

Average 281

Source

Blue Chip

212015 amp 1212014

rmaurer
Text Box


Expected




SampP 500 210 (b) 837 1047

= 1013




rmaurer
Text Box



Total 10000 818

Rate Base 17702965800$




Total 10000 796

Rate Base 17702965800$




Companys Claim

rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box




OCA-VI-14




OCA-VI-14

rmaurer
Text Box
rmaurer
Rectangle



100

150

200

250

350


300

400

2012 2013 2014 20152009 2010 2011





Untimely Shares




Regulatory Changes



Dividend Payers


Conclusion


Adam J Platt



rmaurer
Text Box





30

600

120

300

2012 2013 2014 20152009 2010 2011

1000

60

















Conclusion


Wilkeiy Tan



rmaurer
Text Box



10

20

30

40

50

60


80

100

2012 2013 2014 20152009 2010 2011















Conclusion



Adam Rosner



rmaurer
Text Box



20

40

100


200

120

60

80

160

2012 2013 2014 20152009 2010 2011




The Housing Market








The Niche Retailers



Conclusion





rmaurer
Text Box

Retail (Softlines)


50

100


200

75

150

2011 2013 20142008 2009 2010 2012


















J Susan Ferrara



rmaurer
Text Box



120

240

360


480

2011 2013 20142008 2009 2010 2012
















Robert M Greene CFA



rmaurer
Text Box

Thrift


20

120

160


40

60

80

100

200

2012 2013 2014 20152009 2010 201110






















Robert Mitkowski Jr



rmaurer
Text Box




10000 10000 10000 10000 10000Aqua America






10000 10000 10000 10000 10000Middlesex Water


10000 10000 10000 10000 10000SJW Corp


10000 10000 10000 10000 10000York Water


10000 10000 10000 10000 10000


5 Year Average


Source Compustat


rmaurer
Text Box

Water Utility


700


300

600

400

500

2012 2013 20142008 2009 2010 2011




















Conclusion



James A Flood



rmaurer
Text Box

Interest

Charges

Long-term

Debt

Debt

Cost


Aqua America 77754 146858 529




SJW Corp 20827 33500 622

York Water 5244 8489 618

Low 350High 725

Average 570

Source Compustat

2013

Range

rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box









rmaurer
Text Box









rmaurer
Text Box





Rp xRf 1 xRg

ERp xRf 1 xERg

Rp 1 x Rg x 10




g

s(R )

a

c

b

T

E(R )

Rf




rmaurer
Text Box





ERM ERZMiM i 1 N



2RM




rmaurer
Text Box









2RM CovRM RM Cov i1

N

xiMRi RM i1

N

xiMCovRi RM


rmaurer
Text Box










rmaurer
Text Box






ERp i1

N

xipERi and pM i1

N

xippM


ERi ERf ERM ERfiM



rmaurer
Text Box










rmaurer
Text Box








056

8

10

12

14

16

18

07 09 11 13 15 17 19

Ave

rage

an

nua

lized

mon

thly

ret

urn

(

)


rmaurer
Text Box







rmaurer
Text Box





Recent Tests




rmaurer
Text Box







rmaurer
Text Box







rmaurer
Text Box







isESMBt ihEHMLt




rmaurer
Text Box










rmaurer
Text Box







rmaurer
Text Box









rmaurer
Text Box







rmaurer
Text Box


Conclusions





079

10

11

12

13

14

15

16

17

08

10 (highest BM)

9

6

32

1 (lowest BM)

5 4

78

09 1 11 12

Ave

rage

an

nua

lized

mon

thly

ret

urn

(

)


rmaurer
Text Box







rmaurer
Text Box

References

































rmaurer
Text Box




























rmaurer
Text Box





(3) Average 274 603 877




rmaurer
Text Box

Yahoo

MS

NM

oney

Morn

ing

Sta

r

Valu

eLin

e

Avera

ge

Company Symbol


Aqua America WTR 400 500 580 850 583




SJW Corp SJW 1400 NA 1400 700 1167


603

Source

Internet

January 28 2015


Source

rmaurer
Text Box

Average








ConnecticutWater


rmaurer
Text Box

Company Beta


Aqua America 070



Middlesex Water 070

SJW Corp 085

York Water 065


Source

Value Line

January 16 2015

rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 44169

Rm = 112511

Be = 07071

Re = 925


Blue Chip 212015 amp 1212014


rmaurer
Text Box







Average 442


rmaurer
Text Box


Expected

Market

Return







rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 28100

Rm = 101329

Be = 07071

Re = 799


Blue Chip 212015 amp 1212014


rmaurer
Text Box

Risk Free Rate


4Q 2014 228

1Q 2015 210

2Q 2015 230

3Q 2015 250

4Q 2015 270

1Q 2016 300

2Q 2016 320

2016-2020 440

Average 281

Source

Blue Chip

212015 amp 1212014

rmaurer
Text Box


Expected




SampP 500 210 (b) 837 1047

= 1013




rmaurer
Text Box



Total 10000 818

Rate Base 17702965800$




Total 10000 796

Rate Base 17702965800$




Companys Claim

rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box




OCA-VI-14




OCA-VI-14

rmaurer
Text Box
rmaurer
Rectangle





30

600

120

300

2012 2013 2014 20152009 2010 2011

1000

60

















Conclusion


Wilkeiy Tan



rmaurer
Text Box



10

20

30

40

50

60


80

100

2012 2013 2014 20152009 2010 2011















Conclusion



Adam Rosner



rmaurer
Text Box



20

40

100


200

120

60

80

160

2012 2013 2014 20152009 2010 2011




The Housing Market








The Niche Retailers



Conclusion





rmaurer
Text Box

Retail (Softlines)


50

100


200

75

150

2011 2013 20142008 2009 2010 2012


















J Susan Ferrara



rmaurer
Text Box



120

240

360


480

2011 2013 20142008 2009 2010 2012
















Robert M Greene CFA



rmaurer
Text Box

Thrift


20

120

160


40

60

80

100

200

2012 2013 2014 20152009 2010 201110






















Robert Mitkowski Jr



rmaurer
Text Box




10000 10000 10000 10000 10000Aqua America






10000 10000 10000 10000 10000Middlesex Water


10000 10000 10000 10000 10000SJW Corp


10000 10000 10000 10000 10000York Water


10000 10000 10000 10000 10000


5 Year Average


Source Compustat


rmaurer
Text Box

Water Utility


700


300

600

400

500

2012 2013 20142008 2009 2010 2011




















Conclusion



James A Flood



rmaurer
Text Box

Interest

Charges

Long-term

Debt

Debt

Cost


Aqua America 77754 146858 529




SJW Corp 20827 33500 622

York Water 5244 8489 618

Low 350High 725

Average 570

Source Compustat

2013

Range

rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box









rmaurer
Text Box









rmaurer
Text Box





Rp xRf 1 xRg

ERp xRf 1 xERg

Rp 1 x Rg x 10




g

s(R )

a

c

b

T

E(R )

Rf




rmaurer
Text Box





ERM ERZMiM i 1 N



2RM




rmaurer
Text Box









2RM CovRM RM Cov i1

N

xiMRi RM i1

N

xiMCovRi RM


rmaurer
Text Box










rmaurer
Text Box






ERp i1

N

xipERi and pM i1

N

xippM


ERi ERf ERM ERfiM



rmaurer
Text Box










rmaurer
Text Box








056

8

10

12

14

16

18

07 09 11 13 15 17 19

Ave

rage

an

nua

lized

mon

thly

ret

urn

(

)


rmaurer
Text Box







rmaurer
Text Box





Recent Tests




rmaurer
Text Box







rmaurer
Text Box







rmaurer
Text Box







isESMBt ihEHMLt




rmaurer
Text Box










rmaurer
Text Box







rmaurer
Text Box









rmaurer
Text Box







rmaurer
Text Box


Conclusions





079

10

11

12

13

14

15

16

17

08

10 (highest BM)

9

6

32

1 (lowest BM)

5 4

78

09 1 11 12

Ave

rage

an

nua

lized

mon

thly

ret

urn

(

)


rmaurer
Text Box







rmaurer
Text Box

References

































rmaurer
Text Box




























rmaurer
Text Box





(3) Average 274 603 877




rmaurer
Text Box

Yahoo

MS

NM

oney

Morn

ing

Sta

r

Valu

eLin

e

Avera

ge

Company Symbol


Aqua America WTR 400 500 580 850 583




SJW Corp SJW 1400 NA 1400 700 1167


603

Source

Internet

January 28 2015


Source

rmaurer
Text Box

Average








ConnecticutWater


rmaurer
Text Box

Company Beta


Aqua America 070



Middlesex Water 070

SJW Corp 085

York Water 065


Source

Value Line

January 16 2015

rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 44169

Rm = 112511

Be = 07071

Re = 925


Blue Chip 212015 amp 1212014


rmaurer
Text Box







Average 442


rmaurer
Text Box


Expected

Market

Return







rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 28100

Rm = 101329

Be = 07071

Re = 799


Blue Chip 212015 amp 1212014


rmaurer
Text Box

Risk Free Rate


4Q 2014 228

1Q 2015 210

2Q 2015 230

3Q 2015 250

4Q 2015 270

1Q 2016 300

2Q 2016 320

2016-2020 440

Average 281

Source

Blue Chip

212015 amp 1212014

rmaurer
Text Box


Expected




SampP 500 210 (b) 837 1047

= 1013




rmaurer
Text Box



Total 10000 818

Rate Base 17702965800$




Total 10000 796

Rate Base 17702965800$




Companys Claim

rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box




OCA-VI-14




OCA-VI-14

rmaurer
Text Box
rmaurer
Rectangle



10

20

30

40

50

60


80

100

2012 2013 2014 20152009 2010 2011















Conclusion



Adam Rosner



rmaurer
Text Box



20

40

100


200

120

60

80

160

2012 2013 2014 20152009 2010 2011




The Housing Market








The Niche Retailers



Conclusion





rmaurer
Text Box

Retail (Softlines)


50

100


200

75

150

2011 2013 20142008 2009 2010 2012


















J Susan Ferrara



rmaurer
Text Box



120

240

360


480

2011 2013 20142008 2009 2010 2012
















Robert M Greene CFA



rmaurer
Text Box

Thrift


20

120

160


40

60

80

100

200

2012 2013 2014 20152009 2010 201110






















Robert Mitkowski Jr



rmaurer
Text Box




10000 10000 10000 10000 10000Aqua America






10000 10000 10000 10000 10000Middlesex Water


10000 10000 10000 10000 10000SJW Corp


10000 10000 10000 10000 10000York Water


10000 10000 10000 10000 10000


5 Year Average


Source Compustat


rmaurer
Text Box

Water Utility


700


300

600

400

500

2012 2013 20142008 2009 2010 2011




















Conclusion



James A Flood



rmaurer
Text Box

Interest

Charges

Long-term

Debt

Debt

Cost


Aqua America 77754 146858 529




SJW Corp 20827 33500 622

York Water 5244 8489 618

Low 350High 725

Average 570

Source Compustat

2013

Range

rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box









rmaurer
Text Box









rmaurer
Text Box





Rp xRf 1 xRg

ERp xRf 1 xERg

Rp 1 x Rg x 10




g

s(R )

a

c

b

T

E(R )

Rf




rmaurer
Text Box





ERM ERZMiM i 1 N



2RM




rmaurer
Text Box









2RM CovRM RM Cov i1

N

xiMRi RM i1

N

xiMCovRi RM


rmaurer
Text Box










rmaurer
Text Box






ERp i1

N

xipERi and pM i1

N

xippM


ERi ERf ERM ERfiM



rmaurer
Text Box










rmaurer
Text Box








056

8

10

12

14

16

18

07 09 11 13 15 17 19

Ave

rage

an

nua

lized

mon

thly

ret

urn

(

)


rmaurer
Text Box







rmaurer
Text Box





Recent Tests




rmaurer
Text Box







rmaurer
Text Box







rmaurer
Text Box







isESMBt ihEHMLt




rmaurer
Text Box










rmaurer
Text Box







rmaurer
Text Box









rmaurer
Text Box







rmaurer
Text Box


Conclusions





079

10

11

12

13

14

15

16

17

08

10 (highest BM)

9

6

32

1 (lowest BM)

5 4

78

09 1 11 12

Ave

rage

an

nua

lized

mon

thly

ret

urn

(

)


rmaurer
Text Box







rmaurer
Text Box

References

































rmaurer
Text Box




























rmaurer
Text Box





(3) Average 274 603 877




rmaurer
Text Box

Yahoo

MS

NM

oney

Morn

ing

Sta

r

Valu

eLin

e

Avera

ge

Company Symbol


Aqua America WTR 400 500 580 850 583




SJW Corp SJW 1400 NA 1400 700 1167


603

Source

Internet

January 28 2015


Source

rmaurer
Text Box

Average








ConnecticutWater


rmaurer
Text Box

Company Beta


Aqua America 070



Middlesex Water 070

SJW Corp 085

York Water 065


Source

Value Line

January 16 2015

rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 44169

Rm = 112511

Be = 07071

Re = 925


Blue Chip 212015 amp 1212014


rmaurer
Text Box







Average 442


rmaurer
Text Box


Expected

Market

Return







rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 28100

Rm = 101329

Be = 07071

Re = 799


Blue Chip 212015 amp 1212014


rmaurer
Text Box

Risk Free Rate


4Q 2014 228

1Q 2015 210

2Q 2015 230

3Q 2015 250

4Q 2015 270

1Q 2016 300

2Q 2016 320

2016-2020 440

Average 281

Source

Blue Chip

212015 amp 1212014

rmaurer
Text Box


Expected




SampP 500 210 (b) 837 1047

= 1013




rmaurer
Text Box



Total 10000 818

Rate Base 17702965800$




Total 10000 796

Rate Base 17702965800$




Companys Claim

rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box




OCA-VI-14




OCA-VI-14

rmaurer
Text Box
rmaurer
Rectangle



20

40

100


200

120

60

80

160

2012 2013 2014 20152009 2010 2011




The Housing Market








The Niche Retailers



Conclusion





rmaurer
Text Box

Retail (Softlines)


50

100


200

75

150

2011 2013 20142008 2009 2010 2012


















J Susan Ferrara



rmaurer
Text Box



120

240

360


480

2011 2013 20142008 2009 2010 2012
















Robert M Greene CFA



rmaurer
Text Box

Thrift


20

120

160


40

60

80

100

200

2012 2013 2014 20152009 2010 201110






















Robert Mitkowski Jr



rmaurer
Text Box




10000 10000 10000 10000 10000Aqua America






10000 10000 10000 10000 10000Middlesex Water


10000 10000 10000 10000 10000SJW Corp


10000 10000 10000 10000 10000York Water


10000 10000 10000 10000 10000


5 Year Average


Source Compustat


rmaurer
Text Box

Water Utility


700


300

600

400

500

2012 2013 20142008 2009 2010 2011




















Conclusion



James A Flood



rmaurer
Text Box

Interest

Charges

Long-term

Debt

Debt

Cost


Aqua America 77754 146858 529




SJW Corp 20827 33500 622

York Water 5244 8489 618

Low 350High 725

Average 570

Source Compustat

2013

Range

rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box









rmaurer
Text Box









rmaurer
Text Box





Rp xRf 1 xRg

ERp xRf 1 xERg

Rp 1 x Rg x 10




g

s(R )

a

c

b

T

E(R )

Rf




rmaurer
Text Box





ERM ERZMiM i 1 N



2RM




rmaurer
Text Box









2RM CovRM RM Cov i1

N

xiMRi RM i1

N

xiMCovRi RM


rmaurer
Text Box










rmaurer
Text Box






ERp i1

N

xipERi and pM i1

N

xippM


ERi ERf ERM ERfiM



rmaurer
Text Box










rmaurer
Text Box








056

8

10

12

14

16

18

07 09 11 13 15 17 19

Ave

rage

an

nua

lized

mon

thly

ret

urn

(

)


rmaurer
Text Box







rmaurer
Text Box





Recent Tests




rmaurer
Text Box







rmaurer
Text Box







rmaurer
Text Box







isESMBt ihEHMLt




rmaurer
Text Box










rmaurer
Text Box







rmaurer
Text Box









rmaurer
Text Box







rmaurer
Text Box


Conclusions





079

10

11

12

13

14

15

16

17

08

10 (highest BM)

9

6

32

1 (lowest BM)

5 4

78

09 1 11 12

Ave

rage

an

nua

lized

mon

thly

ret

urn

(

)


rmaurer
Text Box







rmaurer
Text Box

References

































rmaurer
Text Box




























rmaurer
Text Box





(3) Average 274 603 877




rmaurer
Text Box

Yahoo

MS

NM

oney

Morn

ing

Sta

r

Valu

eLin

e

Avera

ge

Company Symbol


Aqua America WTR 400 500 580 850 583




SJW Corp SJW 1400 NA 1400 700 1167


603

Source

Internet

January 28 2015


Source

rmaurer
Text Box

Average








ConnecticutWater


rmaurer
Text Box

Company Beta


Aqua America 070



Middlesex Water 070

SJW Corp 085

York Water 065


Source

Value Line

January 16 2015

rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 44169

Rm = 112511

Be = 07071

Re = 925


Blue Chip 212015 amp 1212014


rmaurer
Text Box







Average 442


rmaurer
Text Box


Expected

Market

Return







rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 28100

Rm = 101329

Be = 07071

Re = 799


Blue Chip 212015 amp 1212014


rmaurer
Text Box

Risk Free Rate


4Q 2014 228

1Q 2015 210

2Q 2015 230

3Q 2015 250

4Q 2015 270

1Q 2016 300

2Q 2016 320

2016-2020 440

Average 281

Source

Blue Chip

212015 amp 1212014

rmaurer
Text Box


Expected




SampP 500 210 (b) 837 1047

= 1013




rmaurer
Text Box



Total 10000 818

Rate Base 17702965800$




Total 10000 796

Rate Base 17702965800$




Companys Claim

rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box




OCA-VI-14




OCA-VI-14

rmaurer
Text Box
rmaurer
Rectangle

Retail (Softlines)


50

100


200

75

150

2011 2013 20142008 2009 2010 2012


















J Susan Ferrara



rmaurer
Text Box



120

240

360


480

2011 2013 20142008 2009 2010 2012
















Robert M Greene CFA



rmaurer
Text Box

Thrift


20

120

160


40

60

80

100

200

2012 2013 2014 20152009 2010 201110






















Robert Mitkowski Jr



rmaurer
Text Box




10000 10000 10000 10000 10000Aqua America






10000 10000 10000 10000 10000Middlesex Water


10000 10000 10000 10000 10000SJW Corp


10000 10000 10000 10000 10000York Water


10000 10000 10000 10000 10000


5 Year Average


Source Compustat


rmaurer
Text Box

Water Utility


700


300

600

400

500

2012 2013 20142008 2009 2010 2011




















Conclusion



James A Flood



rmaurer
Text Box

Interest

Charges

Long-term

Debt

Debt

Cost


Aqua America 77754 146858 529




SJW Corp 20827 33500 622

York Water 5244 8489 618

Low 350High 725

Average 570

Source Compustat

2013

Range

rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box









rmaurer
Text Box









rmaurer
Text Box





Rp xRf 1 xRg

ERp xRf 1 xERg

Rp 1 x Rg x 10




g

s(R )

a

c

b

T

E(R )

Rf




rmaurer
Text Box





ERM ERZMiM i 1 N



2RM




rmaurer
Text Box









2RM CovRM RM Cov i1

N

xiMRi RM i1

N

xiMCovRi RM


rmaurer
Text Box










rmaurer
Text Box






ERp i1

N

xipERi and pM i1

N

xippM


ERi ERf ERM ERfiM



rmaurer
Text Box










rmaurer
Text Box








056

8

10

12

14

16

18

07 09 11 13 15 17 19

Ave

rage

an

nua

lized

mon

thly

ret

urn

(

)


rmaurer
Text Box







rmaurer
Text Box





Recent Tests




rmaurer
Text Box







rmaurer
Text Box







rmaurer
Text Box







isESMBt ihEHMLt




rmaurer
Text Box










rmaurer
Text Box







rmaurer
Text Box









rmaurer
Text Box







rmaurer
Text Box


Conclusions





079

10

11

12

13

14

15

16

17

08

10 (highest BM)

9

6

32

1 (lowest BM)

5 4

78

09 1 11 12

Ave

rage

an

nua

lized

mon

thly

ret

urn

(

)


rmaurer
Text Box







rmaurer
Text Box

References

































rmaurer
Text Box




























rmaurer
Text Box





(3) Average 274 603 877




rmaurer
Text Box

Yahoo

MS

NM

oney

Morn

ing

Sta

r

Valu

eLin

e

Avera

ge

Company Symbol


Aqua America WTR 400 500 580 850 583




SJW Corp SJW 1400 NA 1400 700 1167


603

Source

Internet

January 28 2015


Source

rmaurer
Text Box

Average








ConnecticutWater


rmaurer
Text Box

Company Beta


Aqua America 070



Middlesex Water 070

SJW Corp 085

York Water 065


Source

Value Line

January 16 2015

rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 44169

Rm = 112511

Be = 07071

Re = 925


Blue Chip 212015 amp 1212014


rmaurer
Text Box







Average 442


rmaurer
Text Box


Expected

Market

Return







rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 28100

Rm = 101329

Be = 07071

Re = 799


Blue Chip 212015 amp 1212014


rmaurer
Text Box

Risk Free Rate


4Q 2014 228

1Q 2015 210

2Q 2015 230

3Q 2015 250

4Q 2015 270

1Q 2016 300

2Q 2016 320

2016-2020 440

Average 281

Source

Blue Chip

212015 amp 1212014

rmaurer
Text Box


Expected




SampP 500 210 (b) 837 1047

= 1013




rmaurer
Text Box



Total 10000 818

Rate Base 17702965800$




Total 10000 796

Rate Base 17702965800$




Companys Claim

rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box




OCA-VI-14




OCA-VI-14

rmaurer
Text Box
rmaurer
Rectangle



120

240

360


480

2011 2013 20142008 2009 2010 2012
















Robert M Greene CFA



rmaurer
Text Box

Thrift


20

120

160


40

60

80

100

200

2012 2013 2014 20152009 2010 201110






















Robert Mitkowski Jr



rmaurer
Text Box




10000 10000 10000 10000 10000Aqua America






10000 10000 10000 10000 10000Middlesex Water


10000 10000 10000 10000 10000SJW Corp


10000 10000 10000 10000 10000York Water


10000 10000 10000 10000 10000


5 Year Average


Source Compustat


rmaurer
Text Box

Water Utility


700


300

600

400

500

2012 2013 20142008 2009 2010 2011




















Conclusion



James A Flood



rmaurer
Text Box

Interest

Charges

Long-term

Debt

Debt

Cost


Aqua America 77754 146858 529




SJW Corp 20827 33500 622

York Water 5244 8489 618

Low 350High 725

Average 570

Source Compustat

2013

Range

rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box









rmaurer
Text Box









rmaurer
Text Box





Rp xRf 1 xRg

ERp xRf 1 xERg

Rp 1 x Rg x 10




g

s(R )

a

c

b

T

E(R )

Rf




rmaurer
Text Box





ERM ERZMiM i 1 N



2RM




rmaurer
Text Box









2RM CovRM RM Cov i1

N

xiMRi RM i1

N

xiMCovRi RM


rmaurer
Text Box










rmaurer
Text Box






ERp i1

N

xipERi and pM i1

N

xippM


ERi ERf ERM ERfiM



rmaurer
Text Box










rmaurer
Text Box








056

8

10

12

14

16

18

07 09 11 13 15 17 19

Ave

rage

an

nua

lized

mon

thly

ret

urn

(

)


rmaurer
Text Box







rmaurer
Text Box





Recent Tests




rmaurer
Text Box







rmaurer
Text Box







rmaurer
Text Box







isESMBt ihEHMLt




rmaurer
Text Box










rmaurer
Text Box







rmaurer
Text Box









rmaurer
Text Box







rmaurer
Text Box


Conclusions





079

10

11

12

13

14

15

16

17

08

10 (highest BM)

9

6

32

1 (lowest BM)

5 4

78

09 1 11 12

Ave

rage

an

nua

lized

mon

thly

ret

urn

(

)


rmaurer
Text Box







rmaurer
Text Box

References

































rmaurer
Text Box




























rmaurer
Text Box





(3) Average 274 603 877




rmaurer
Text Box

Yahoo

MS

NM

oney

Morn

ing

Sta

r

Valu

eLin

e

Avera

ge

Company Symbol


Aqua America WTR 400 500 580 850 583




SJW Corp SJW 1400 NA 1400 700 1167


603

Source

Internet

January 28 2015


Source

rmaurer
Text Box

Average








ConnecticutWater


rmaurer
Text Box

Company Beta


Aqua America 070



Middlesex Water 070

SJW Corp 085

York Water 065


Source

Value Line

January 16 2015

rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 44169

Rm = 112511

Be = 07071

Re = 925


Blue Chip 212015 amp 1212014


rmaurer
Text Box







Average 442


rmaurer
Text Box


Expected

Market

Return







rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 28100

Rm = 101329

Be = 07071

Re = 799


Blue Chip 212015 amp 1212014


rmaurer
Text Box

Risk Free Rate


4Q 2014 228

1Q 2015 210

2Q 2015 230

3Q 2015 250

4Q 2015 270

1Q 2016 300

2Q 2016 320

2016-2020 440

Average 281

Source

Blue Chip

212015 amp 1212014

rmaurer
Text Box


Expected




SampP 500 210 (b) 837 1047

= 1013




rmaurer
Text Box



Total 10000 818

Rate Base 17702965800$




Total 10000 796

Rate Base 17702965800$




Companys Claim

rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box




OCA-VI-14




OCA-VI-14

rmaurer
Text Box
rmaurer
Rectangle

Thrift


20

120

160


40

60

80

100

200

2012 2013 2014 20152009 2010 201110






















Robert Mitkowski Jr



rmaurer
Text Box




10000 10000 10000 10000 10000Aqua America






10000 10000 10000 10000 10000Middlesex Water


10000 10000 10000 10000 10000SJW Corp


10000 10000 10000 10000 10000York Water


10000 10000 10000 10000 10000


5 Year Average


Source Compustat


rmaurer
Text Box

Water Utility


700


300

600

400

500

2012 2013 20142008 2009 2010 2011




















Conclusion



James A Flood



rmaurer
Text Box

Interest

Charges

Long-term

Debt

Debt

Cost


Aqua America 77754 146858 529




SJW Corp 20827 33500 622

York Water 5244 8489 618

Low 350High 725

Average 570

Source Compustat

2013

Range

rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box









rmaurer
Text Box









rmaurer
Text Box





Rp xRf 1 xRg

ERp xRf 1 xERg

Rp 1 x Rg x 10




g

s(R )

a

c

b

T

E(R )

Rf




rmaurer
Text Box





ERM ERZMiM i 1 N



2RM




rmaurer
Text Box









2RM CovRM RM Cov i1

N

xiMRi RM i1

N

xiMCovRi RM


rmaurer
Text Box










rmaurer
Text Box






ERp i1

N

xipERi and pM i1

N

xippM


ERi ERf ERM ERfiM



rmaurer
Text Box










rmaurer
Text Box








056

8

10

12

14

16

18

07 09 11 13 15 17 19

Ave

rage

an

nua

lized

mon

thly

ret

urn

(

)


rmaurer
Text Box







rmaurer
Text Box





Recent Tests




rmaurer
Text Box







rmaurer
Text Box







rmaurer
Text Box







isESMBt ihEHMLt




rmaurer
Text Box










rmaurer
Text Box







rmaurer
Text Box









rmaurer
Text Box







rmaurer
Text Box


Conclusions





079

10

11

12

13

14

15

16

17

08

10 (highest BM)

9

6

32

1 (lowest BM)

5 4

78

09 1 11 12

Ave

rage

an

nua

lized

mon

thly

ret

urn

(

)


rmaurer
Text Box







rmaurer
Text Box

References

































rmaurer
Text Box




























rmaurer
Text Box





(3) Average 274 603 877




rmaurer
Text Box

Yahoo

MS

NM

oney

Morn

ing

Sta

r

Valu

eLin

e

Avera

ge

Company Symbol


Aqua America WTR 400 500 580 850 583




SJW Corp SJW 1400 NA 1400 700 1167


603

Source

Internet

January 28 2015


Source

rmaurer
Text Box

Average








ConnecticutWater


rmaurer
Text Box

Company Beta


Aqua America 070



Middlesex Water 070

SJW Corp 085

York Water 065


Source

Value Line

January 16 2015

rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 44169

Rm = 112511

Be = 07071

Re = 925


Blue Chip 212015 amp 1212014


rmaurer
Text Box







Average 442


rmaurer
Text Box


Expected

Market

Return







rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 28100

Rm = 101329

Be = 07071

Re = 799


Blue Chip 212015 amp 1212014


rmaurer
Text Box

Risk Free Rate


4Q 2014 228

1Q 2015 210

2Q 2015 230

3Q 2015 250

4Q 2015 270

1Q 2016 300

2Q 2016 320

2016-2020 440

Average 281

Source

Blue Chip

212015 amp 1212014

rmaurer
Text Box


Expected




SampP 500 210 (b) 837 1047

= 1013




rmaurer
Text Box



Total 10000 818

Rate Base 17702965800$




Total 10000 796

Rate Base 17702965800$




Companys Claim

rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box




OCA-VI-14




OCA-VI-14

rmaurer
Text Box
rmaurer
Rectangle




10000 10000 10000 10000 10000Aqua America






10000 10000 10000 10000 10000Middlesex Water


10000 10000 10000 10000 10000SJW Corp


10000 10000 10000 10000 10000York Water


10000 10000 10000 10000 10000


5 Year Average


Source Compustat


rmaurer
Text Box

Water Utility


700


300

600

400

500

2012 2013 20142008 2009 2010 2011




















Conclusion



James A Flood



rmaurer
Text Box

Interest

Charges

Long-term

Debt

Debt

Cost


Aqua America 77754 146858 529




SJW Corp 20827 33500 622

York Water 5244 8489 618

Low 350High 725

Average 570

Source Compustat

2013

Range

rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box









rmaurer
Text Box









rmaurer
Text Box





Rp xRf 1 xRg

ERp xRf 1 xERg

Rp 1 x Rg x 10




g

s(R )

a

c

b

T

E(R )

Rf




rmaurer
Text Box





ERM ERZMiM i 1 N



2RM




rmaurer
Text Box









2RM CovRM RM Cov i1

N

xiMRi RM i1

N

xiMCovRi RM


rmaurer
Text Box










rmaurer
Text Box






ERp i1

N

xipERi and pM i1

N

xippM


ERi ERf ERM ERfiM



rmaurer
Text Box










rmaurer
Text Box








056

8

10

12

14

16

18

07 09 11 13 15 17 19

Ave

rage

an

nua

lized

mon

thly

ret

urn

(

)


rmaurer
Text Box







rmaurer
Text Box





Recent Tests




rmaurer
Text Box







rmaurer
Text Box







rmaurer
Text Box







isESMBt ihEHMLt




rmaurer
Text Box










rmaurer
Text Box







rmaurer
Text Box









rmaurer
Text Box







rmaurer
Text Box


Conclusions





079

10

11

12

13

14

15

16

17

08

10 (highest BM)

9

6

32

1 (lowest BM)

5 4

78

09 1 11 12

Ave

rage

an

nua

lized

mon

thly

ret

urn

(

)


rmaurer
Text Box







rmaurer
Text Box

References

































rmaurer
Text Box




























rmaurer
Text Box





(3) Average 274 603 877




rmaurer
Text Box

Yahoo

MS

NM

oney

Morn

ing

Sta

r

Valu

eLin

e

Avera

ge

Company Symbol


Aqua America WTR 400 500 580 850 583




SJW Corp SJW 1400 NA 1400 700 1167


603

Source

Internet

January 28 2015


Source

rmaurer
Text Box

Average








ConnecticutWater


rmaurer
Text Box

Company Beta


Aqua America 070



Middlesex Water 070

SJW Corp 085

York Water 065


Source

Value Line

January 16 2015

rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 44169

Rm = 112511

Be = 07071

Re = 925


Blue Chip 212015 amp 1212014


rmaurer
Text Box







Average 442


rmaurer
Text Box


Expected

Market

Return







rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 28100

Rm = 101329

Be = 07071

Re = 799


Blue Chip 212015 amp 1212014


rmaurer
Text Box

Risk Free Rate


4Q 2014 228

1Q 2015 210

2Q 2015 230

3Q 2015 250

4Q 2015 270

1Q 2016 300

2Q 2016 320

2016-2020 440

Average 281

Source

Blue Chip

212015 amp 1212014

rmaurer
Text Box


Expected




SampP 500 210 (b) 837 1047

= 1013




rmaurer
Text Box



Total 10000 818

Rate Base 17702965800$




Total 10000 796

Rate Base 17702965800$




Companys Claim

rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box




OCA-VI-14




OCA-VI-14

rmaurer
Text Box
rmaurer
Rectangle

Water Utility


700


300

600

400

500

2012 2013 20142008 2009 2010 2011




















Conclusion



James A Flood



rmaurer
Text Box

Interest

Charges

Long-term

Debt

Debt

Cost


Aqua America 77754 146858 529




SJW Corp 20827 33500 622

York Water 5244 8489 618

Low 350High 725

Average 570

Source Compustat

2013

Range

rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box









rmaurer
Text Box









rmaurer
Text Box





Rp xRf 1 xRg

ERp xRf 1 xERg

Rp 1 x Rg x 10




g

s(R )

a

c

b

T

E(R )

Rf




rmaurer
Text Box





ERM ERZMiM i 1 N



2RM




rmaurer
Text Box









2RM CovRM RM Cov i1

N

xiMRi RM i1

N

xiMCovRi RM


rmaurer
Text Box










rmaurer
Text Box






ERp i1

N

xipERi and pM i1

N

xippM


ERi ERf ERM ERfiM



rmaurer
Text Box










rmaurer
Text Box








056

8

10

12

14

16

18

07 09 11 13 15 17 19

Ave

rage

an

nua

lized

mon

thly

ret

urn

(

)


rmaurer
Text Box







rmaurer
Text Box





Recent Tests




rmaurer
Text Box







rmaurer
Text Box







rmaurer
Text Box







isESMBt ihEHMLt




rmaurer
Text Box










rmaurer
Text Box







rmaurer
Text Box









rmaurer
Text Box







rmaurer
Text Box


Conclusions





079

10

11

12

13

14

15

16

17

08

10 (highest BM)

9

6

32

1 (lowest BM)

5 4

78

09 1 11 12

Ave

rage

an

nua

lized

mon

thly

ret

urn

(

)


rmaurer
Text Box







rmaurer
Text Box

References

































rmaurer
Text Box




























rmaurer
Text Box





(3) Average 274 603 877




rmaurer
Text Box

Yahoo

MS

NM

oney

Morn

ing

Sta

r

Valu

eLin

e

Avera

ge

Company Symbol


Aqua America WTR 400 500 580 850 583




SJW Corp SJW 1400 NA 1400 700 1167


603

Source

Internet

January 28 2015


Source

rmaurer
Text Box

Average








ConnecticutWater


rmaurer
Text Box

Company Beta


Aqua America 070



Middlesex Water 070

SJW Corp 085

York Water 065


Source

Value Line

January 16 2015

rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 44169

Rm = 112511

Be = 07071

Re = 925


Blue Chip 212015 amp 1212014


rmaurer
Text Box







Average 442


rmaurer
Text Box


Expected

Market

Return







rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 28100

Rm = 101329

Be = 07071

Re = 799


Blue Chip 212015 amp 1212014


rmaurer
Text Box

Risk Free Rate


4Q 2014 228

1Q 2015 210

2Q 2015 230

3Q 2015 250

4Q 2015 270

1Q 2016 300

2Q 2016 320

2016-2020 440

Average 281

Source

Blue Chip

212015 amp 1212014

rmaurer
Text Box


Expected




SampP 500 210 (b) 837 1047

= 1013




rmaurer
Text Box



Total 10000 818

Rate Base 17702965800$




Total 10000 796

Rate Base 17702965800$




Companys Claim

rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box




OCA-VI-14




OCA-VI-14

rmaurer
Text Box
rmaurer
Rectangle

Interest

Charges

Long-term

Debt

Debt

Cost


Aqua America 77754 146858 529




SJW Corp 20827 33500 622

York Water 5244 8489 618

Low 350High 725

Average 570

Source Compustat

2013

Range

rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box









rmaurer
Text Box









rmaurer
Text Box





Rp xRf 1 xRg

ERp xRf 1 xERg

Rp 1 x Rg x 10




g

s(R )

a

c

b

T

E(R )

Rf




rmaurer
Text Box





ERM ERZMiM i 1 N



2RM




rmaurer
Text Box









2RM CovRM RM Cov i1

N

xiMRi RM i1

N

xiMCovRi RM


rmaurer
Text Box










rmaurer
Text Box






ERp i1

N

xipERi and pM i1

N

xippM


ERi ERf ERM ERfiM



rmaurer
Text Box










rmaurer
Text Box








056

8

10

12

14

16

18

07 09 11 13 15 17 19

Ave

rage

an

nua

lized

mon

thly

ret

urn

(

)


rmaurer
Text Box







rmaurer
Text Box





Recent Tests




rmaurer
Text Box







rmaurer
Text Box







rmaurer
Text Box







isESMBt ihEHMLt




rmaurer
Text Box










rmaurer
Text Box







rmaurer
Text Box









rmaurer
Text Box







rmaurer
Text Box


Conclusions





079

10

11

12

13

14

15

16

17

08

10 (highest BM)

9

6

32

1 (lowest BM)

5 4

78

09 1 11 12

Ave

rage

an

nua

lized

mon

thly

ret

urn

(

)


rmaurer
Text Box







rmaurer
Text Box

References

































rmaurer
Text Box




























rmaurer
Text Box





(3) Average 274 603 877




rmaurer
Text Box

Yahoo

MS

NM

oney

Morn

ing

Sta

r

Valu

eLin

e

Avera

ge

Company Symbol


Aqua America WTR 400 500 580 850 583




SJW Corp SJW 1400 NA 1400 700 1167


603

Source

Internet

January 28 2015


Source

rmaurer
Text Box

Average








ConnecticutWater


rmaurer
Text Box

Company Beta


Aqua America 070



Middlesex Water 070

SJW Corp 085

York Water 065


Source

Value Line

January 16 2015

rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 44169

Rm = 112511

Be = 07071

Re = 925


Blue Chip 212015 amp 1212014


rmaurer
Text Box







Average 442


rmaurer
Text Box


Expected

Market

Return







rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 28100

Rm = 101329

Be = 07071

Re = 799


Blue Chip 212015 amp 1212014


rmaurer
Text Box

Risk Free Rate


4Q 2014 228

1Q 2015 210

2Q 2015 230

3Q 2015 250

4Q 2015 270

1Q 2016 300

2Q 2016 320

2016-2020 440

Average 281

Source

Blue Chip

212015 amp 1212014

rmaurer
Text Box


Expected




SampP 500 210 (b) 837 1047

= 1013




rmaurer
Text Box



Total 10000 818

Rate Base 17702965800$




Total 10000 796

Rate Base 17702965800$




Companys Claim

rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box




OCA-VI-14




OCA-VI-14

rmaurer
Text Box
rmaurer
Rectangle

rmaurer
Text Box
rmaurer
Text Box









rmaurer
Text Box









rmaurer
Text Box





Rp xRf 1 xRg

ERp xRf 1 xERg

Rp 1 x Rg x 10




g

s(R )

a

c

b

T

E(R )

Rf




rmaurer
Text Box





ERM ERZMiM i 1 N



2RM




rmaurer
Text Box









2RM CovRM RM Cov i1

N

xiMRi RM i1

N

xiMCovRi RM


rmaurer
Text Box










rmaurer
Text Box






ERp i1

N

xipERi and pM i1

N

xippM


ERi ERf ERM ERfiM



rmaurer
Text Box










rmaurer
Text Box








056

8

10

12

14

16

18

07 09 11 13 15 17 19

Ave

rage

an

nua

lized

mon

thly

ret

urn

(

)


rmaurer
Text Box







rmaurer
Text Box





Recent Tests




rmaurer
Text Box







rmaurer
Text Box







rmaurer
Text Box







isESMBt ihEHMLt




rmaurer
Text Box










rmaurer
Text Box







rmaurer
Text Box









rmaurer
Text Box







rmaurer
Text Box


Conclusions





079

10

11

12

13

14

15

16

17

08

10 (highest BM)

9

6

32

1 (lowest BM)

5 4

78

09 1 11 12

Ave

rage

an

nua

lized

mon

thly

ret

urn

(

)


rmaurer
Text Box







rmaurer
Text Box

References

































rmaurer
Text Box




























rmaurer
Text Box





(3) Average 274 603 877




rmaurer
Text Box

Yahoo

MS

NM

oney

Morn

ing

Sta

r

Valu

eLin

e

Avera

ge

Company Symbol


Aqua America WTR 400 500 580 850 583




SJW Corp SJW 1400 NA 1400 700 1167


603

Source

Internet

January 28 2015


Source

rmaurer
Text Box

Average








ConnecticutWater


rmaurer
Text Box

Company Beta


Aqua America 070



Middlesex Water 070

SJW Corp 085

York Water 065


Source

Value Line

January 16 2015

rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 44169

Rm = 112511

Be = 07071

Re = 925


Blue Chip 212015 amp 1212014


rmaurer
Text Box







Average 442


rmaurer
Text Box


Expected

Market

Return







rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 28100

Rm = 101329

Be = 07071

Re = 799


Blue Chip 212015 amp 1212014


rmaurer
Text Box

Risk Free Rate


4Q 2014 228

1Q 2015 210

2Q 2015 230

3Q 2015 250

4Q 2015 270

1Q 2016 300

2Q 2016 320

2016-2020 440

Average 281

Source

Blue Chip

212015 amp 1212014

rmaurer
Text Box


Expected




SampP 500 210 (b) 837 1047

= 1013




rmaurer
Text Box



Total 10000 818

Rate Base 17702965800$




Total 10000 796

Rate Base 17702965800$




Companys Claim

rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box




OCA-VI-14




OCA-VI-14

rmaurer
Text Box
rmaurer
Rectangle

rmaurer
Text Box









rmaurer
Text Box









rmaurer
Text Box





Rp xRf 1 xRg

ERp xRf 1 xERg

Rp 1 x Rg x 10




g

s(R )

a

c

b

T

E(R )

Rf




rmaurer
Text Box





ERM ERZMiM i 1 N



2RM




rmaurer
Text Box









2RM CovRM RM Cov i1

N

xiMRi RM i1

N

xiMCovRi RM


rmaurer
Text Box










rmaurer
Text Box






ERp i1

N

xipERi and pM i1

N

xippM


ERi ERf ERM ERfiM



rmaurer
Text Box










rmaurer
Text Box








056

8

10

12

14

16

18

07 09 11 13 15 17 19

Ave

rage

an

nua

lized

mon

thly

ret

urn

(

)


rmaurer
Text Box







rmaurer
Text Box





Recent Tests




rmaurer
Text Box







rmaurer
Text Box







rmaurer
Text Box







isESMBt ihEHMLt




rmaurer
Text Box










rmaurer
Text Box







rmaurer
Text Box









rmaurer
Text Box







rmaurer
Text Box


Conclusions





079

10

11

12

13

14

15

16

17

08

10 (highest BM)

9

6

32

1 (lowest BM)

5 4

78

09 1 11 12

Ave

rage

an

nua

lized

mon

thly

ret

urn

(

)


rmaurer
Text Box







rmaurer
Text Box

References

































rmaurer
Text Box




























rmaurer
Text Box





(3) Average 274 603 877




rmaurer
Text Box

Yahoo

MS

NM

oney

Morn

ing

Sta

r

Valu

eLin

e

Avera

ge

Company Symbol


Aqua America WTR 400 500 580 850 583




SJW Corp SJW 1400 NA 1400 700 1167


603

Source

Internet

January 28 2015


Source

rmaurer
Text Box

Average








ConnecticutWater


rmaurer
Text Box

Company Beta


Aqua America 070



Middlesex Water 070

SJW Corp 085

York Water 065


Source

Value Line

January 16 2015

rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 44169

Rm = 112511

Be = 07071

Re = 925


Blue Chip 212015 amp 1212014


rmaurer
Text Box







Average 442


rmaurer
Text Box


Expected

Market

Return







rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 28100

Rm = 101329

Be = 07071

Re = 799


Blue Chip 212015 amp 1212014


rmaurer
Text Box

Risk Free Rate


4Q 2014 228

1Q 2015 210

2Q 2015 230

3Q 2015 250

4Q 2015 270

1Q 2016 300

2Q 2016 320

2016-2020 440

Average 281

Source

Blue Chip

212015 amp 1212014

rmaurer
Text Box


Expected




SampP 500 210 (b) 837 1047

= 1013




rmaurer
Text Box



Total 10000 818

Rate Base 17702965800$




Total 10000 796

Rate Base 17702965800$




Companys Claim

rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box




OCA-VI-14




OCA-VI-14

rmaurer
Text Box
rmaurer
Rectangle









rmaurer
Text Box









rmaurer
Text Box





Rp xRf 1 xRg

ERp xRf 1 xERg

Rp 1 x Rg x 10




g

s(R )

a

c

b

T

E(R )

Rf




rmaurer
Text Box





ERM ERZMiM i 1 N



2RM




rmaurer
Text Box









2RM CovRM RM Cov i1

N

xiMRi RM i1

N

xiMCovRi RM


rmaurer
Text Box










rmaurer
Text Box






ERp i1

N

xipERi and pM i1

N

xippM


ERi ERf ERM ERfiM



rmaurer
Text Box










rmaurer
Text Box








056

8

10

12

14

16

18

07 09 11 13 15 17 19

Ave

rage

an

nua

lized

mon

thly

ret

urn

(

)


rmaurer
Text Box







rmaurer
Text Box





Recent Tests




rmaurer
Text Box







rmaurer
Text Box







rmaurer
Text Box







isESMBt ihEHMLt




rmaurer
Text Box










rmaurer
Text Box







rmaurer
Text Box









rmaurer
Text Box







rmaurer
Text Box


Conclusions





079

10

11

12

13

14

15

16

17

08

10 (highest BM)

9

6

32

1 (lowest BM)

5 4

78

09 1 11 12

Ave

rage

an

nua

lized

mon

thly

ret

urn

(

)


rmaurer
Text Box







rmaurer
Text Box

References

































rmaurer
Text Box




























rmaurer
Text Box





(3) Average 274 603 877




rmaurer
Text Box

Yahoo

MS

NM

oney

Morn

ing

Sta

r

Valu

eLin

e

Avera

ge

Company Symbol


Aqua America WTR 400 500 580 850 583




SJW Corp SJW 1400 NA 1400 700 1167


603

Source

Internet

January 28 2015


Source

rmaurer
Text Box

Average








ConnecticutWater


rmaurer
Text Box

Company Beta


Aqua America 070



Middlesex Water 070

SJW Corp 085

York Water 065


Source

Value Line

January 16 2015

rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 44169

Rm = 112511

Be = 07071

Re = 925


Blue Chip 212015 amp 1212014


rmaurer
Text Box







Average 442


rmaurer
Text Box


Expected

Market

Return







rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 28100

Rm = 101329

Be = 07071

Re = 799


Blue Chip 212015 amp 1212014


rmaurer
Text Box

Risk Free Rate


4Q 2014 228

1Q 2015 210

2Q 2015 230

3Q 2015 250

4Q 2015 270

1Q 2016 300

2Q 2016 320

2016-2020 440

Average 281

Source

Blue Chip

212015 amp 1212014

rmaurer
Text Box


Expected




SampP 500 210 (b) 837 1047

= 1013




rmaurer
Text Box



Total 10000 818

Rate Base 17702965800$




Total 10000 796

Rate Base 17702965800$




Companys Claim

rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box




OCA-VI-14




OCA-VI-14

rmaurer
Text Box
rmaurer
Rectangle









rmaurer
Text Box





Rp xRf 1 xRg

ERp xRf 1 xERg

Rp 1 x Rg x 10




g

s(R )

a

c

b

T

E(R )

Rf




rmaurer
Text Box





ERM ERZMiM i 1 N



2RM




rmaurer
Text Box









2RM CovRM RM Cov i1

N

xiMRi RM i1

N

xiMCovRi RM


rmaurer
Text Box










rmaurer
Text Box






ERp i1

N

xipERi and pM i1

N

xippM


ERi ERf ERM ERfiM



rmaurer
Text Box










rmaurer
Text Box








056

8

10

12

14

16

18

07 09 11 13 15 17 19

Ave

rage

an

nua

lized

mon

thly

ret

urn

(

)


rmaurer
Text Box







rmaurer
Text Box





Recent Tests




rmaurer
Text Box







rmaurer
Text Box







rmaurer
Text Box







isESMBt ihEHMLt




rmaurer
Text Box










rmaurer
Text Box







rmaurer
Text Box









rmaurer
Text Box







rmaurer
Text Box


Conclusions





079

10

11

12

13

14

15

16

17

08

10 (highest BM)

9

6

32

1 (lowest BM)

5 4

78

09 1 11 12

Ave

rage

an

nua

lized

mon

thly

ret

urn

(

)


rmaurer
Text Box







rmaurer
Text Box

References

































rmaurer
Text Box




























rmaurer
Text Box





(3) Average 274 603 877




rmaurer
Text Box

Yahoo

MS

NM

oney

Morn

ing

Sta

r

Valu

eLin

e

Avera

ge

Company Symbol


Aqua America WTR 400 500 580 850 583




SJW Corp SJW 1400 NA 1400 700 1167


603

Source

Internet

January 28 2015


Source

rmaurer
Text Box

Average








ConnecticutWater


rmaurer
Text Box

Company Beta


Aqua America 070



Middlesex Water 070

SJW Corp 085

York Water 065


Source

Value Line

January 16 2015

rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 44169

Rm = 112511

Be = 07071

Re = 925


Blue Chip 212015 amp 1212014


rmaurer
Text Box







Average 442


rmaurer
Text Box


Expected

Market

Return







rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 28100

Rm = 101329

Be = 07071

Re = 799


Blue Chip 212015 amp 1212014


rmaurer
Text Box

Risk Free Rate


4Q 2014 228

1Q 2015 210

2Q 2015 230

3Q 2015 250

4Q 2015 270

1Q 2016 300

2Q 2016 320

2016-2020 440

Average 281

Source

Blue Chip

212015 amp 1212014

rmaurer
Text Box


Expected




SampP 500 210 (b) 837 1047

= 1013




rmaurer
Text Box



Total 10000 818

Rate Base 17702965800$




Total 10000 796

Rate Base 17702965800$




Companys Claim

rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box




OCA-VI-14




OCA-VI-14

rmaurer
Text Box
rmaurer
Rectangle





Rp xRf 1 xRg

ERp xRf 1 xERg

Rp 1 x Rg x 10




g

s(R )

a

c

b

T

E(R )

Rf




rmaurer
Text Box





ERM ERZMiM i 1 N



2RM




rmaurer
Text Box









2RM CovRM RM Cov i1

N

xiMRi RM i1

N

xiMCovRi RM


rmaurer
Text Box










rmaurer
Text Box






ERp i1

N

xipERi and pM i1

N

xippM


ERi ERf ERM ERfiM



rmaurer
Text Box










rmaurer
Text Box








056

8

10

12

14

16

18

07 09 11 13 15 17 19

Ave

rage

an

nua

lized

mon

thly

ret

urn

(

)


rmaurer
Text Box







rmaurer
Text Box





Recent Tests




rmaurer
Text Box







rmaurer
Text Box







rmaurer
Text Box







isESMBt ihEHMLt




rmaurer
Text Box










rmaurer
Text Box







rmaurer
Text Box









rmaurer
Text Box







rmaurer
Text Box


Conclusions





079

10

11

12

13

14

15

16

17

08

10 (highest BM)

9

6

32

1 (lowest BM)

5 4

78

09 1 11 12

Ave

rage

an

nua

lized

mon

thly

ret

urn

(

)


rmaurer
Text Box







rmaurer
Text Box

References

































rmaurer
Text Box




























rmaurer
Text Box





(3) Average 274 603 877




rmaurer
Text Box

Yahoo

MS

NM

oney

Morn

ing

Sta

r

Valu

eLin

e

Avera

ge

Company Symbol


Aqua America WTR 400 500 580 850 583




SJW Corp SJW 1400 NA 1400 700 1167


603

Source

Internet

January 28 2015


Source

rmaurer
Text Box

Average








ConnecticutWater


rmaurer
Text Box

Company Beta


Aqua America 070



Middlesex Water 070

SJW Corp 085

York Water 065


Source

Value Line

January 16 2015

rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 44169

Rm = 112511

Be = 07071

Re = 925


Blue Chip 212015 amp 1212014


rmaurer
Text Box







Average 442


rmaurer
Text Box


Expected

Market

Return







rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 28100

Rm = 101329

Be = 07071

Re = 799


Blue Chip 212015 amp 1212014


rmaurer
Text Box

Risk Free Rate


4Q 2014 228

1Q 2015 210

2Q 2015 230

3Q 2015 250

4Q 2015 270

1Q 2016 300

2Q 2016 320

2016-2020 440

Average 281

Source

Blue Chip

212015 amp 1212014

rmaurer
Text Box


Expected




SampP 500 210 (b) 837 1047

= 1013




rmaurer
Text Box



Total 10000 818

Rate Base 17702965800$




Total 10000 796

Rate Base 17702965800$




Companys Claim

rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box




OCA-VI-14




OCA-VI-14

rmaurer
Text Box
rmaurer
Rectangle





ERM ERZMiM i 1 N



2RM




rmaurer
Text Box









2RM CovRM RM Cov i1

N

xiMRi RM i1

N

xiMCovRi RM


rmaurer
Text Box










rmaurer
Text Box






ERp i1

N

xipERi and pM i1

N

xippM


ERi ERf ERM ERfiM



rmaurer
Text Box










rmaurer
Text Box








056

8

10

12

14

16

18

07 09 11 13 15 17 19

Ave

rage

an

nua

lized

mon

thly

ret

urn

(

)


rmaurer
Text Box







rmaurer
Text Box





Recent Tests




rmaurer
Text Box







rmaurer
Text Box







rmaurer
Text Box







isESMBt ihEHMLt




rmaurer
Text Box










rmaurer
Text Box







rmaurer
Text Box









rmaurer
Text Box







rmaurer
Text Box


Conclusions





079

10

11

12

13

14

15

16

17

08

10 (highest BM)

9

6

32

1 (lowest BM)

5 4

78

09 1 11 12

Ave

rage

an

nua

lized

mon

thly

ret

urn

(

)


rmaurer
Text Box







rmaurer
Text Box

References

































rmaurer
Text Box




























rmaurer
Text Box





(3) Average 274 603 877




rmaurer
Text Box

Yahoo

MS

NM

oney

Morn

ing

Sta

r

Valu

eLin

e

Avera

ge

Company Symbol


Aqua America WTR 400 500 580 850 583




SJW Corp SJW 1400 NA 1400 700 1167


603

Source

Internet

January 28 2015


Source

rmaurer
Text Box

Average








ConnecticutWater


rmaurer
Text Box

Company Beta


Aqua America 070



Middlesex Water 070

SJW Corp 085

York Water 065


Source

Value Line

January 16 2015

rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 44169

Rm = 112511

Be = 07071

Re = 925


Blue Chip 212015 amp 1212014


rmaurer
Text Box







Average 442


rmaurer
Text Box


Expected

Market

Return







rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 28100

Rm = 101329

Be = 07071

Re = 799


Blue Chip 212015 amp 1212014


rmaurer
Text Box

Risk Free Rate


4Q 2014 228

1Q 2015 210

2Q 2015 230

3Q 2015 250

4Q 2015 270

1Q 2016 300

2Q 2016 320

2016-2020 440

Average 281

Source

Blue Chip

212015 amp 1212014

rmaurer
Text Box


Expected




SampP 500 210 (b) 837 1047

= 1013




rmaurer
Text Box



Total 10000 818

Rate Base 17702965800$




Total 10000 796

Rate Base 17702965800$




Companys Claim

rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box




OCA-VI-14




OCA-VI-14

rmaurer
Text Box
rmaurer
Rectangle









2RM CovRM RM Cov i1

N

xiMRi RM i1

N

xiMCovRi RM


rmaurer
Text Box










rmaurer
Text Box






ERp i1

N

xipERi and pM i1

N

xippM


ERi ERf ERM ERfiM



rmaurer
Text Box










rmaurer
Text Box








056

8

10

12

14

16

18

07 09 11 13 15 17 19

Ave

rage

an

nua

lized

mon

thly

ret

urn

(

)


rmaurer
Text Box







rmaurer
Text Box





Recent Tests




rmaurer
Text Box







rmaurer
Text Box







rmaurer
Text Box







isESMBt ihEHMLt




rmaurer
Text Box










rmaurer
Text Box







rmaurer
Text Box









rmaurer
Text Box







rmaurer
Text Box


Conclusions





079

10

11

12

13

14

15

16

17

08

10 (highest BM)

9

6

32

1 (lowest BM)

5 4

78

09 1 11 12

Ave

rage

an

nua

lized

mon

thly

ret

urn

(

)


rmaurer
Text Box







rmaurer
Text Box

References

































rmaurer
Text Box




























rmaurer
Text Box





(3) Average 274 603 877




rmaurer
Text Box

Yahoo

MS

NM

oney

Morn

ing

Sta

r

Valu

eLin

e

Avera

ge

Company Symbol


Aqua America WTR 400 500 580 850 583




SJW Corp SJW 1400 NA 1400 700 1167


603

Source

Internet

January 28 2015


Source

rmaurer
Text Box

Average








ConnecticutWater


rmaurer
Text Box

Company Beta


Aqua America 070



Middlesex Water 070

SJW Corp 085

York Water 065


Source

Value Line

January 16 2015

rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 44169

Rm = 112511

Be = 07071

Re = 925


Blue Chip 212015 amp 1212014


rmaurer
Text Box







Average 442


rmaurer
Text Box


Expected

Market

Return







rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 28100

Rm = 101329

Be = 07071

Re = 799


Blue Chip 212015 amp 1212014


rmaurer
Text Box

Risk Free Rate


4Q 2014 228

1Q 2015 210

2Q 2015 230

3Q 2015 250

4Q 2015 270

1Q 2016 300

2Q 2016 320

2016-2020 440

Average 281

Source

Blue Chip

212015 amp 1212014

rmaurer
Text Box


Expected




SampP 500 210 (b) 837 1047

= 1013




rmaurer
Text Box



Total 10000 818

Rate Base 17702965800$




Total 10000 796

Rate Base 17702965800$




Companys Claim

rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box




OCA-VI-14




OCA-VI-14

rmaurer
Text Box
rmaurer
Rectangle










rmaurer
Text Box






ERp i1

N

xipERi and pM i1

N

xippM


ERi ERf ERM ERfiM



rmaurer
Text Box










rmaurer
Text Box








056

8

10

12

14

16

18

07 09 11 13 15 17 19

Ave

rage

an

nua

lized

mon

thly

ret

urn

(

)


rmaurer
Text Box







rmaurer
Text Box





Recent Tests




rmaurer
Text Box







rmaurer
Text Box







rmaurer
Text Box







isESMBt ihEHMLt




rmaurer
Text Box










rmaurer
Text Box







rmaurer
Text Box









rmaurer
Text Box







rmaurer
Text Box


Conclusions





079

10

11

12

13

14

15

16

17

08

10 (highest BM)

9

6

32

1 (lowest BM)

5 4

78

09 1 11 12

Ave

rage

an

nua

lized

mon

thly

ret

urn

(

)


rmaurer
Text Box







rmaurer
Text Box

References

































rmaurer
Text Box




























rmaurer
Text Box





(3) Average 274 603 877




rmaurer
Text Box

Yahoo

MS

NM

oney

Morn

ing

Sta

r

Valu

eLin

e

Avera

ge

Company Symbol


Aqua America WTR 400 500 580 850 583




SJW Corp SJW 1400 NA 1400 700 1167


603

Source

Internet

January 28 2015


Source

rmaurer
Text Box

Average








ConnecticutWater


rmaurer
Text Box

Company Beta


Aqua America 070



Middlesex Water 070

SJW Corp 085

York Water 065


Source

Value Line

January 16 2015

rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 44169

Rm = 112511

Be = 07071

Re = 925


Blue Chip 212015 amp 1212014


rmaurer
Text Box







Average 442


rmaurer
Text Box


Expected

Market

Return







rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 28100

Rm = 101329

Be = 07071

Re = 799


Blue Chip 212015 amp 1212014


rmaurer
Text Box

Risk Free Rate


4Q 2014 228

1Q 2015 210

2Q 2015 230

3Q 2015 250

4Q 2015 270

1Q 2016 300

2Q 2016 320

2016-2020 440

Average 281

Source

Blue Chip

212015 amp 1212014

rmaurer
Text Box


Expected




SampP 500 210 (b) 837 1047

= 1013




rmaurer
Text Box



Total 10000 818

Rate Base 17702965800$




Total 10000 796

Rate Base 17702965800$




Companys Claim

rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box




OCA-VI-14




OCA-VI-14

rmaurer
Text Box
rmaurer
Rectangle






ERp i1

N

xipERi and pM i1

N

xippM


ERi ERf ERM ERfiM



rmaurer
Text Box










rmaurer
Text Box








056

8

10

12

14

16

18

07 09 11 13 15 17 19

Ave

rage

an

nua

lized

mon

thly

ret

urn

(

)


rmaurer
Text Box







rmaurer
Text Box





Recent Tests




rmaurer
Text Box







rmaurer
Text Box







rmaurer
Text Box







isESMBt ihEHMLt




rmaurer
Text Box










rmaurer
Text Box







rmaurer
Text Box









rmaurer
Text Box







rmaurer
Text Box


Conclusions





079

10

11

12

13

14

15

16

17

08

10 (highest BM)

9

6

32

1 (lowest BM)

5 4

78

09 1 11 12

Ave

rage

an

nua

lized

mon

thly

ret

urn

(

)


rmaurer
Text Box







rmaurer
Text Box

References

































rmaurer
Text Box




























rmaurer
Text Box





(3) Average 274 603 877




rmaurer
Text Box

Yahoo

MS

NM

oney

Morn

ing

Sta

r

Valu

eLin

e

Avera

ge

Company Symbol


Aqua America WTR 400 500 580 850 583




SJW Corp SJW 1400 NA 1400 700 1167


603

Source

Internet

January 28 2015


Source

rmaurer
Text Box

Average








ConnecticutWater


rmaurer
Text Box

Company Beta


Aqua America 070



Middlesex Water 070

SJW Corp 085

York Water 065


Source

Value Line

January 16 2015

rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 44169

Rm = 112511

Be = 07071

Re = 925


Blue Chip 212015 amp 1212014


rmaurer
Text Box







Average 442


rmaurer
Text Box


Expected

Market

Return







rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 28100

Rm = 101329

Be = 07071

Re = 799


Blue Chip 212015 amp 1212014


rmaurer
Text Box

Risk Free Rate


4Q 2014 228

1Q 2015 210

2Q 2015 230

3Q 2015 250

4Q 2015 270

1Q 2016 300

2Q 2016 320

2016-2020 440

Average 281

Source

Blue Chip

212015 amp 1212014

rmaurer
Text Box


Expected




SampP 500 210 (b) 837 1047

= 1013




rmaurer
Text Box



Total 10000 818

Rate Base 17702965800$




Total 10000 796

Rate Base 17702965800$




Companys Claim

rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box




OCA-VI-14




OCA-VI-14

rmaurer
Text Box
rmaurer
Rectangle










rmaurer
Text Box








056

8

10

12

14

16

18

07 09 11 13 15 17 19

Ave

rage

an

nua

lized

mon

thly

ret

urn

(

)


rmaurer
Text Box







rmaurer
Text Box





Recent Tests




rmaurer
Text Box







rmaurer
Text Box







rmaurer
Text Box







isESMBt ihEHMLt




rmaurer
Text Box










rmaurer
Text Box







rmaurer
Text Box









rmaurer
Text Box







rmaurer
Text Box


Conclusions





079

10

11

12

13

14

15

16

17

08

10 (highest BM)

9

6

32

1 (lowest BM)

5 4

78

09 1 11 12

Ave

rage

an

nua

lized

mon

thly

ret

urn

(

)


rmaurer
Text Box







rmaurer
Text Box

References

































rmaurer
Text Box




























rmaurer
Text Box





(3) Average 274 603 877




rmaurer
Text Box

Yahoo

MS

NM

oney

Morn

ing

Sta

r

Valu

eLin

e

Avera

ge

Company Symbol


Aqua America WTR 400 500 580 850 583




SJW Corp SJW 1400 NA 1400 700 1167


603

Source

Internet

January 28 2015


Source

rmaurer
Text Box

Average








ConnecticutWater


rmaurer
Text Box

Company Beta


Aqua America 070



Middlesex Water 070

SJW Corp 085

York Water 065


Source

Value Line

January 16 2015

rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 44169

Rm = 112511

Be = 07071

Re = 925


Blue Chip 212015 amp 1212014


rmaurer
Text Box







Average 442


rmaurer
Text Box


Expected

Market

Return







rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 28100

Rm = 101329

Be = 07071

Re = 799


Blue Chip 212015 amp 1212014


rmaurer
Text Box

Risk Free Rate


4Q 2014 228

1Q 2015 210

2Q 2015 230

3Q 2015 250

4Q 2015 270

1Q 2016 300

2Q 2016 320

2016-2020 440

Average 281

Source

Blue Chip

212015 amp 1212014

rmaurer
Text Box


Expected




SampP 500 210 (b) 837 1047

= 1013




rmaurer
Text Box



Total 10000 818

Rate Base 17702965800$




Total 10000 796

Rate Base 17702965800$




Companys Claim

rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box




OCA-VI-14




OCA-VI-14

rmaurer
Text Box
rmaurer
Rectangle








056

8

10

12

14

16

18

07 09 11 13 15 17 19

Ave

rage

an

nua

lized

mon

thly

ret

urn

(

)


rmaurer
Text Box







rmaurer
Text Box





Recent Tests




rmaurer
Text Box







rmaurer
Text Box







rmaurer
Text Box







isESMBt ihEHMLt




rmaurer
Text Box










rmaurer
Text Box







rmaurer
Text Box









rmaurer
Text Box







rmaurer
Text Box


Conclusions





079

10

11

12

13

14

15

16

17

08

10 (highest BM)

9

6

32

1 (lowest BM)

5 4

78

09 1 11 12

Ave

rage

an

nua

lized

mon

thly

ret

urn

(

)


rmaurer
Text Box







rmaurer
Text Box

References

































rmaurer
Text Box




























rmaurer
Text Box





(3) Average 274 603 877




rmaurer
Text Box

Yahoo

MS

NM

oney

Morn

ing

Sta

r

Valu

eLin

e

Avera

ge

Company Symbol


Aqua America WTR 400 500 580 850 583




SJW Corp SJW 1400 NA 1400 700 1167


603

Source

Internet

January 28 2015


Source

rmaurer
Text Box

Average








ConnecticutWater


rmaurer
Text Box

Company Beta


Aqua America 070



Middlesex Water 070

SJW Corp 085

York Water 065


Source

Value Line

January 16 2015

rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 44169

Rm = 112511

Be = 07071

Re = 925


Blue Chip 212015 amp 1212014


rmaurer
Text Box







Average 442


rmaurer
Text Box


Expected

Market

Return







rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 28100

Rm = 101329

Be = 07071

Re = 799


Blue Chip 212015 amp 1212014


rmaurer
Text Box

Risk Free Rate


4Q 2014 228

1Q 2015 210

2Q 2015 230

3Q 2015 250

4Q 2015 270

1Q 2016 300

2Q 2016 320

2016-2020 440

Average 281

Source

Blue Chip

212015 amp 1212014

rmaurer
Text Box


Expected




SampP 500 210 (b) 837 1047

= 1013




rmaurer
Text Box



Total 10000 818

Rate Base 17702965800$




Total 10000 796

Rate Base 17702965800$




Companys Claim

rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box




OCA-VI-14




OCA-VI-14

rmaurer
Text Box
rmaurer
Rectangle







rmaurer
Text Box





Recent Tests




rmaurer
Text Box







rmaurer
Text Box







rmaurer
Text Box







isESMBt ihEHMLt




rmaurer
Text Box










rmaurer
Text Box







rmaurer
Text Box









rmaurer
Text Box







rmaurer
Text Box


Conclusions





079

10

11

12

13

14

15

16

17

08

10 (highest BM)

9

6

32

1 (lowest BM)

5 4

78

09 1 11 12

Ave

rage

an

nua

lized

mon

thly

ret

urn

(

)


rmaurer
Text Box







rmaurer
Text Box

References

































rmaurer
Text Box




























rmaurer
Text Box





(3) Average 274 603 877




rmaurer
Text Box

Yahoo

MS

NM

oney

Morn

ing

Sta

r

Valu

eLin

e

Avera

ge

Company Symbol


Aqua America WTR 400 500 580 850 583




SJW Corp SJW 1400 NA 1400 700 1167


603

Source

Internet

January 28 2015


Source

rmaurer
Text Box

Average








ConnecticutWater


rmaurer
Text Box

Company Beta


Aqua America 070



Middlesex Water 070

SJW Corp 085

York Water 065


Source

Value Line

January 16 2015

rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 44169

Rm = 112511

Be = 07071

Re = 925


Blue Chip 212015 amp 1212014


rmaurer
Text Box







Average 442


rmaurer
Text Box


Expected

Market

Return







rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 28100

Rm = 101329

Be = 07071

Re = 799


Blue Chip 212015 amp 1212014


rmaurer
Text Box

Risk Free Rate


4Q 2014 228

1Q 2015 210

2Q 2015 230

3Q 2015 250

4Q 2015 270

1Q 2016 300

2Q 2016 320

2016-2020 440

Average 281

Source

Blue Chip

212015 amp 1212014

rmaurer
Text Box


Expected




SampP 500 210 (b) 837 1047

= 1013




rmaurer
Text Box



Total 10000 818

Rate Base 17702965800$




Total 10000 796

Rate Base 17702965800$




Companys Claim

rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box




OCA-VI-14




OCA-VI-14

rmaurer
Text Box
rmaurer
Rectangle





Recent Tests




rmaurer
Text Box







rmaurer
Text Box







rmaurer
Text Box







isESMBt ihEHMLt




rmaurer
Text Box










rmaurer
Text Box







rmaurer
Text Box









rmaurer
Text Box







rmaurer
Text Box


Conclusions





079

10

11

12

13

14

15

16

17

08

10 (highest BM)

9

6

32

1 (lowest BM)

5 4

78

09 1 11 12

Ave

rage

an

nua

lized

mon

thly

ret

urn

(

)


rmaurer
Text Box







rmaurer
Text Box

References

































rmaurer
Text Box




























rmaurer
Text Box





(3) Average 274 603 877




rmaurer
Text Box

Yahoo

MS

NM

oney

Morn

ing

Sta

r

Valu

eLin

e

Avera

ge

Company Symbol


Aqua America WTR 400 500 580 850 583




SJW Corp SJW 1400 NA 1400 700 1167


603

Source

Internet

January 28 2015


Source

rmaurer
Text Box

Average








ConnecticutWater


rmaurer
Text Box

Company Beta


Aqua America 070



Middlesex Water 070

SJW Corp 085

York Water 065


Source

Value Line

January 16 2015

rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 44169

Rm = 112511

Be = 07071

Re = 925


Blue Chip 212015 amp 1212014


rmaurer
Text Box







Average 442


rmaurer
Text Box


Expected

Market

Return







rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 28100

Rm = 101329

Be = 07071

Re = 799


Blue Chip 212015 amp 1212014


rmaurer
Text Box

Risk Free Rate


4Q 2014 228

1Q 2015 210

2Q 2015 230

3Q 2015 250

4Q 2015 270

1Q 2016 300

2Q 2016 320

2016-2020 440

Average 281

Source

Blue Chip

212015 amp 1212014

rmaurer
Text Box


Expected




SampP 500 210 (b) 837 1047

= 1013




rmaurer
Text Box



Total 10000 818

Rate Base 17702965800$




Total 10000 796

Rate Base 17702965800$




Companys Claim

rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box




OCA-VI-14




OCA-VI-14

rmaurer
Text Box
rmaurer
Rectangle







rmaurer
Text Box







rmaurer
Text Box







isESMBt ihEHMLt




rmaurer
Text Box










rmaurer
Text Box







rmaurer
Text Box









rmaurer
Text Box







rmaurer
Text Box


Conclusions





079

10

11

12

13

14

15

16

17

08

10 (highest BM)

9

6

32

1 (lowest BM)

5 4

78

09 1 11 12

Ave

rage

an

nua

lized

mon

thly

ret

urn

(

)


rmaurer
Text Box







rmaurer
Text Box

References

































rmaurer
Text Box




























rmaurer
Text Box





(3) Average 274 603 877




rmaurer
Text Box

Yahoo

MS

NM

oney

Morn

ing

Sta

r

Valu

eLin

e

Avera

ge

Company Symbol


Aqua America WTR 400 500 580 850 583




SJW Corp SJW 1400 NA 1400 700 1167


603

Source

Internet

January 28 2015


Source

rmaurer
Text Box

Average








ConnecticutWater


rmaurer
Text Box

Company Beta


Aqua America 070



Middlesex Water 070

SJW Corp 085

York Water 065


Source

Value Line

January 16 2015

rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 44169

Rm = 112511

Be = 07071

Re = 925


Blue Chip 212015 amp 1212014


rmaurer
Text Box







Average 442


rmaurer
Text Box


Expected

Market

Return







rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 28100

Rm = 101329

Be = 07071

Re = 799


Blue Chip 212015 amp 1212014


rmaurer
Text Box

Risk Free Rate


4Q 2014 228

1Q 2015 210

2Q 2015 230

3Q 2015 250

4Q 2015 270

1Q 2016 300

2Q 2016 320

2016-2020 440

Average 281

Source

Blue Chip

212015 amp 1212014

rmaurer
Text Box


Expected




SampP 500 210 (b) 837 1047

= 1013




rmaurer
Text Box



Total 10000 818

Rate Base 17702965800$




Total 10000 796

Rate Base 17702965800$




Companys Claim

rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box




OCA-VI-14




OCA-VI-14

rmaurer
Text Box
rmaurer
Rectangle







rmaurer
Text Box







isESMBt ihEHMLt




rmaurer
Text Box










rmaurer
Text Box







rmaurer
Text Box









rmaurer
Text Box







rmaurer
Text Box


Conclusions





079

10

11

12

13

14

15

16

17

08

10 (highest BM)

9

6

32

1 (lowest BM)

5 4

78

09 1 11 12

Ave

rage

an

nua

lized

mon

thly

ret

urn

(

)


rmaurer
Text Box







rmaurer
Text Box

References

































rmaurer
Text Box




























rmaurer
Text Box





(3) Average 274 603 877




rmaurer
Text Box

Yahoo

MS

NM

oney

Morn

ing

Sta

r

Valu

eLin

e

Avera

ge

Company Symbol


Aqua America WTR 400 500 580 850 583




SJW Corp SJW 1400 NA 1400 700 1167


603

Source

Internet

January 28 2015


Source

rmaurer
Text Box

Average








ConnecticutWater


rmaurer
Text Box

Company Beta


Aqua America 070



Middlesex Water 070

SJW Corp 085

York Water 065


Source

Value Line

January 16 2015

rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 44169

Rm = 112511

Be = 07071

Re = 925


Blue Chip 212015 amp 1212014


rmaurer
Text Box







Average 442


rmaurer
Text Box


Expected

Market

Return







rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 28100

Rm = 101329

Be = 07071

Re = 799


Blue Chip 212015 amp 1212014


rmaurer
Text Box

Risk Free Rate


4Q 2014 228

1Q 2015 210

2Q 2015 230

3Q 2015 250

4Q 2015 270

1Q 2016 300

2Q 2016 320

2016-2020 440

Average 281

Source

Blue Chip

212015 amp 1212014

rmaurer
Text Box


Expected




SampP 500 210 (b) 837 1047

= 1013




rmaurer
Text Box



Total 10000 818

Rate Base 17702965800$




Total 10000 796

Rate Base 17702965800$




Companys Claim

rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box




OCA-VI-14




OCA-VI-14

rmaurer
Text Box
rmaurer
Rectangle







isESMBt ihEHMLt




rmaurer
Text Box










rmaurer
Text Box







rmaurer
Text Box









rmaurer
Text Box







rmaurer
Text Box


Conclusions





079

10

11

12

13

14

15

16

17

08

10 (highest BM)

9

6

32

1 (lowest BM)

5 4

78

09 1 11 12

Ave

rage

an

nua

lized

mon

thly

ret

urn

(

)


rmaurer
Text Box







rmaurer
Text Box

References

































rmaurer
Text Box




























rmaurer
Text Box





(3) Average 274 603 877




rmaurer
Text Box

Yahoo

MS

NM

oney

Morn

ing

Sta

r

Valu

eLin

e

Avera

ge

Company Symbol


Aqua America WTR 400 500 580 850 583




SJW Corp SJW 1400 NA 1400 700 1167


603

Source

Internet

January 28 2015


Source

rmaurer
Text Box

Average








ConnecticutWater


rmaurer
Text Box

Company Beta


Aqua America 070



Middlesex Water 070

SJW Corp 085

York Water 065


Source

Value Line

January 16 2015

rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 44169

Rm = 112511

Be = 07071

Re = 925


Blue Chip 212015 amp 1212014


rmaurer
Text Box







Average 442


rmaurer
Text Box


Expected

Market

Return







rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 28100

Rm = 101329

Be = 07071

Re = 799


Blue Chip 212015 amp 1212014


rmaurer
Text Box

Risk Free Rate


4Q 2014 228

1Q 2015 210

2Q 2015 230

3Q 2015 250

4Q 2015 270

1Q 2016 300

2Q 2016 320

2016-2020 440

Average 281

Source

Blue Chip

212015 amp 1212014

rmaurer
Text Box


Expected




SampP 500 210 (b) 837 1047

= 1013




rmaurer
Text Box



Total 10000 818

Rate Base 17702965800$




Total 10000 796

Rate Base 17702965800$




Companys Claim

rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box




OCA-VI-14




OCA-VI-14

rmaurer
Text Box
rmaurer
Rectangle










rmaurer
Text Box







rmaurer
Text Box









rmaurer
Text Box







rmaurer
Text Box


Conclusions





079

10

11

12

13

14

15

16

17

08

10 (highest BM)

9

6

32

1 (lowest BM)

5 4

78

09 1 11 12

Ave

rage

an

nua

lized

mon

thly

ret

urn

(

)


rmaurer
Text Box







rmaurer
Text Box

References

































rmaurer
Text Box




























rmaurer
Text Box





(3) Average 274 603 877




rmaurer
Text Box

Yahoo

MS

NM

oney

Morn

ing

Sta

r

Valu

eLin

e

Avera

ge

Company Symbol


Aqua America WTR 400 500 580 850 583




SJW Corp SJW 1400 NA 1400 700 1167


603

Source

Internet

January 28 2015


Source

rmaurer
Text Box

Average








ConnecticutWater


rmaurer
Text Box

Company Beta


Aqua America 070



Middlesex Water 070

SJW Corp 085

York Water 065


Source

Value Line

January 16 2015

rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 44169

Rm = 112511

Be = 07071

Re = 925


Blue Chip 212015 amp 1212014


rmaurer
Text Box







Average 442


rmaurer
Text Box


Expected

Market

Return







rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 28100

Rm = 101329

Be = 07071

Re = 799


Blue Chip 212015 amp 1212014


rmaurer
Text Box

Risk Free Rate


4Q 2014 228

1Q 2015 210

2Q 2015 230

3Q 2015 250

4Q 2015 270

1Q 2016 300

2Q 2016 320

2016-2020 440

Average 281

Source

Blue Chip

212015 amp 1212014

rmaurer
Text Box


Expected




SampP 500 210 (b) 837 1047

= 1013




rmaurer
Text Box



Total 10000 818

Rate Base 17702965800$




Total 10000 796

Rate Base 17702965800$




Companys Claim

rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box




OCA-VI-14




OCA-VI-14

rmaurer
Text Box
rmaurer
Rectangle







rmaurer
Text Box









rmaurer
Text Box







rmaurer
Text Box


Conclusions





079

10

11

12

13

14

15

16

17

08

10 (highest BM)

9

6

32

1 (lowest BM)

5 4

78

09 1 11 12

Ave

rage

an

nua

lized

mon

thly

ret

urn

(

)


rmaurer
Text Box







rmaurer
Text Box

References

































rmaurer
Text Box




























rmaurer
Text Box





(3) Average 274 603 877




rmaurer
Text Box

Yahoo

MS

NM

oney

Morn

ing

Sta

r

Valu

eLin

e

Avera

ge

Company Symbol


Aqua America WTR 400 500 580 850 583




SJW Corp SJW 1400 NA 1400 700 1167


603

Source

Internet

January 28 2015


Source

rmaurer
Text Box

Average








ConnecticutWater


rmaurer
Text Box

Company Beta


Aqua America 070



Middlesex Water 070

SJW Corp 085

York Water 065


Source

Value Line

January 16 2015

rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 44169

Rm = 112511

Be = 07071

Re = 925


Blue Chip 212015 amp 1212014


rmaurer
Text Box







Average 442


rmaurer
Text Box


Expected

Market

Return







rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 28100

Rm = 101329

Be = 07071

Re = 799


Blue Chip 212015 amp 1212014


rmaurer
Text Box

Risk Free Rate


4Q 2014 228

1Q 2015 210

2Q 2015 230

3Q 2015 250

4Q 2015 270

1Q 2016 300

2Q 2016 320

2016-2020 440

Average 281

Source

Blue Chip

212015 amp 1212014

rmaurer
Text Box


Expected




SampP 500 210 (b) 837 1047

= 1013




rmaurer
Text Box



Total 10000 818

Rate Base 17702965800$




Total 10000 796

Rate Base 17702965800$




Companys Claim

rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box




OCA-VI-14




OCA-VI-14

rmaurer
Text Box
rmaurer
Rectangle









rmaurer
Text Box







rmaurer
Text Box


Conclusions





079

10

11

12

13

14

15

16

17

08

10 (highest BM)

9

6

32

1 (lowest BM)

5 4

78

09 1 11 12

Ave

rage

an

nua

lized

mon

thly

ret

urn

(

)


rmaurer
Text Box







rmaurer
Text Box

References

































rmaurer
Text Box




























rmaurer
Text Box





(3) Average 274 603 877




rmaurer
Text Box

Yahoo

MS

NM

oney

Morn

ing

Sta

r

Valu

eLin

e

Avera

ge

Company Symbol


Aqua America WTR 400 500 580 850 583




SJW Corp SJW 1400 NA 1400 700 1167


603

Source

Internet

January 28 2015


Source

rmaurer
Text Box

Average








ConnecticutWater


rmaurer
Text Box

Company Beta


Aqua America 070



Middlesex Water 070

SJW Corp 085

York Water 065


Source

Value Line

January 16 2015

rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 44169

Rm = 112511

Be = 07071

Re = 925


Blue Chip 212015 amp 1212014


rmaurer
Text Box







Average 442


rmaurer
Text Box


Expected

Market

Return







rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 28100

Rm = 101329

Be = 07071

Re = 799


Blue Chip 212015 amp 1212014


rmaurer
Text Box

Risk Free Rate


4Q 2014 228

1Q 2015 210

2Q 2015 230

3Q 2015 250

4Q 2015 270

1Q 2016 300

2Q 2016 320

2016-2020 440

Average 281

Source

Blue Chip

212015 amp 1212014

rmaurer
Text Box


Expected




SampP 500 210 (b) 837 1047

= 1013




rmaurer
Text Box



Total 10000 818

Rate Base 17702965800$




Total 10000 796

Rate Base 17702965800$




Companys Claim

rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box




OCA-VI-14




OCA-VI-14

rmaurer
Text Box
rmaurer
Rectangle







rmaurer
Text Box


Conclusions





079

10

11

12

13

14

15

16

17

08

10 (highest BM)

9

6

32

1 (lowest BM)

5 4

78

09 1 11 12

Ave

rage

an

nua

lized

mon

thly

ret

urn

(

)


rmaurer
Text Box







rmaurer
Text Box

References

































rmaurer
Text Box




























rmaurer
Text Box





(3) Average 274 603 877




rmaurer
Text Box

Yahoo

MS

NM

oney

Morn

ing

Sta

r

Valu

eLin

e

Avera

ge

Company Symbol


Aqua America WTR 400 500 580 850 583




SJW Corp SJW 1400 NA 1400 700 1167


603

Source

Internet

January 28 2015


Source

rmaurer
Text Box

Average








ConnecticutWater


rmaurer
Text Box

Company Beta


Aqua America 070



Middlesex Water 070

SJW Corp 085

York Water 065


Source

Value Line

January 16 2015

rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 44169

Rm = 112511

Be = 07071

Re = 925


Blue Chip 212015 amp 1212014


rmaurer
Text Box







Average 442


rmaurer
Text Box


Expected

Market

Return







rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 28100

Rm = 101329

Be = 07071

Re = 799


Blue Chip 212015 amp 1212014


rmaurer
Text Box

Risk Free Rate


4Q 2014 228

1Q 2015 210

2Q 2015 230

3Q 2015 250

4Q 2015 270

1Q 2016 300

2Q 2016 320

2016-2020 440

Average 281

Source

Blue Chip

212015 amp 1212014

rmaurer
Text Box


Expected




SampP 500 210 (b) 837 1047

= 1013




rmaurer
Text Box



Total 10000 818

Rate Base 17702965800$




Total 10000 796

Rate Base 17702965800$




Companys Claim

rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box




OCA-VI-14




OCA-VI-14

rmaurer
Text Box
rmaurer
Rectangle


Conclusions





079

10

11

12

13

14

15

16

17

08

10 (highest BM)

9

6

32

1 (lowest BM)

5 4

78

09 1 11 12

Ave

rage

an

nua

lized

mon

thly

ret

urn

(

)


rmaurer
Text Box







rmaurer
Text Box

References

































rmaurer
Text Box




























rmaurer
Text Box





(3) Average 274 603 877




rmaurer
Text Box

Yahoo

MS

NM

oney

Morn

ing

Sta

r

Valu

eLin

e

Avera

ge

Company Symbol


Aqua America WTR 400 500 580 850 583




SJW Corp SJW 1400 NA 1400 700 1167


603

Source

Internet

January 28 2015


Source

rmaurer
Text Box

Average








ConnecticutWater


rmaurer
Text Box

Company Beta


Aqua America 070



Middlesex Water 070

SJW Corp 085

York Water 065


Source

Value Line

January 16 2015

rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 44169

Rm = 112511

Be = 07071

Re = 925


Blue Chip 212015 amp 1212014


rmaurer
Text Box







Average 442


rmaurer
Text Box


Expected

Market

Return







rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 28100

Rm = 101329

Be = 07071

Re = 799


Blue Chip 212015 amp 1212014


rmaurer
Text Box

Risk Free Rate


4Q 2014 228

1Q 2015 210

2Q 2015 230

3Q 2015 250

4Q 2015 270

1Q 2016 300

2Q 2016 320

2016-2020 440

Average 281

Source

Blue Chip

212015 amp 1212014

rmaurer
Text Box


Expected




SampP 500 210 (b) 837 1047

= 1013




rmaurer
Text Box



Total 10000 818

Rate Base 17702965800$




Total 10000 796

Rate Base 17702965800$




Companys Claim

rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box




OCA-VI-14




OCA-VI-14

rmaurer
Text Box
rmaurer
Rectangle







rmaurer
Text Box

References

































rmaurer
Text Box




























rmaurer
Text Box





(3) Average 274 603 877




rmaurer
Text Box

Yahoo

MS

NM

oney

Morn

ing

Sta

r

Valu

eLin

e

Avera

ge

Company Symbol


Aqua America WTR 400 500 580 850 583




SJW Corp SJW 1400 NA 1400 700 1167


603

Source

Internet

January 28 2015


Source

rmaurer
Text Box

Average








ConnecticutWater


rmaurer
Text Box

Company Beta


Aqua America 070



Middlesex Water 070

SJW Corp 085

York Water 065


Source

Value Line

January 16 2015

rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 44169

Rm = 112511

Be = 07071

Re = 925


Blue Chip 212015 amp 1212014


rmaurer
Text Box







Average 442


rmaurer
Text Box


Expected

Market

Return







rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 28100

Rm = 101329

Be = 07071

Re = 799


Blue Chip 212015 amp 1212014


rmaurer
Text Box

Risk Free Rate


4Q 2014 228

1Q 2015 210

2Q 2015 230

3Q 2015 250

4Q 2015 270

1Q 2016 300

2Q 2016 320

2016-2020 440

Average 281

Source

Blue Chip

212015 amp 1212014

rmaurer
Text Box


Expected




SampP 500 210 (b) 837 1047

= 1013




rmaurer
Text Box



Total 10000 818

Rate Base 17702965800$




Total 10000 796

Rate Base 17702965800$




Companys Claim

rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box




OCA-VI-14




OCA-VI-14

rmaurer
Text Box
rmaurer
Rectangle

References

































rmaurer
Text Box




























rmaurer
Text Box





(3) Average 274 603 877




rmaurer
Text Box

Yahoo

MS

NM

oney

Morn

ing

Sta

r

Valu

eLin

e

Avera

ge

Company Symbol


Aqua America WTR 400 500 580 850 583




SJW Corp SJW 1400 NA 1400 700 1167


603

Source

Internet

January 28 2015


Source

rmaurer
Text Box

Average








ConnecticutWater


rmaurer
Text Box

Company Beta


Aqua America 070



Middlesex Water 070

SJW Corp 085

York Water 065


Source

Value Line

January 16 2015

rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 44169

Rm = 112511

Be = 07071

Re = 925


Blue Chip 212015 amp 1212014


rmaurer
Text Box







Average 442


rmaurer
Text Box


Expected

Market

Return







rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 28100

Rm = 101329

Be = 07071

Re = 799


Blue Chip 212015 amp 1212014


rmaurer
Text Box

Risk Free Rate


4Q 2014 228

1Q 2015 210

2Q 2015 230

3Q 2015 250

4Q 2015 270

1Q 2016 300

2Q 2016 320

2016-2020 440

Average 281

Source

Blue Chip

212015 amp 1212014

rmaurer
Text Box


Expected




SampP 500 210 (b) 837 1047

= 1013




rmaurer
Text Box



Total 10000 818

Rate Base 17702965800$




Total 10000 796

Rate Base 17702965800$




Companys Claim

rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box




OCA-VI-14




OCA-VI-14

rmaurer
Text Box
rmaurer
Rectangle




























rmaurer
Text Box





(3) Average 274 603 877




rmaurer
Text Box

Yahoo

MS

NM

oney

Morn

ing

Sta

r

Valu

eLin

e

Avera

ge

Company Symbol


Aqua America WTR 400 500 580 850 583




SJW Corp SJW 1400 NA 1400 700 1167


603

Source

Internet

January 28 2015


Source

rmaurer
Text Box

Average








ConnecticutWater


rmaurer
Text Box

Company Beta


Aqua America 070



Middlesex Water 070

SJW Corp 085

York Water 065


Source

Value Line

January 16 2015

rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 44169

Rm = 112511

Be = 07071

Re = 925


Blue Chip 212015 amp 1212014


rmaurer
Text Box







Average 442


rmaurer
Text Box


Expected

Market

Return







rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 28100

Rm = 101329

Be = 07071

Re = 799


Blue Chip 212015 amp 1212014


rmaurer
Text Box

Risk Free Rate


4Q 2014 228

1Q 2015 210

2Q 2015 230

3Q 2015 250

4Q 2015 270

1Q 2016 300

2Q 2016 320

2016-2020 440

Average 281

Source

Blue Chip

212015 amp 1212014

rmaurer
Text Box


Expected




SampP 500 210 (b) 837 1047

= 1013




rmaurer
Text Box



Total 10000 818

Rate Base 17702965800$




Total 10000 796

Rate Base 17702965800$




Companys Claim

rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box




OCA-VI-14




OCA-VI-14

rmaurer
Text Box
rmaurer
Rectangle





(3) Average 274 603 877




rmaurer
Text Box

Yahoo

MS

NM

oney

Morn

ing

Sta

r

Valu

eLin

e

Avera

ge

Company Symbol


Aqua America WTR 400 500 580 850 583




SJW Corp SJW 1400 NA 1400 700 1167


603

Source

Internet

January 28 2015


Source

rmaurer
Text Box

Average








ConnecticutWater


rmaurer
Text Box

Company Beta


Aqua America 070



Middlesex Water 070

SJW Corp 085

York Water 065


Source

Value Line

January 16 2015

rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 44169

Rm = 112511

Be = 07071

Re = 925


Blue Chip 212015 amp 1212014


rmaurer
Text Box







Average 442


rmaurer
Text Box


Expected

Market

Return







rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 28100

Rm = 101329

Be = 07071

Re = 799


Blue Chip 212015 amp 1212014


rmaurer
Text Box

Risk Free Rate


4Q 2014 228

1Q 2015 210

2Q 2015 230

3Q 2015 250

4Q 2015 270

1Q 2016 300

2Q 2016 320

2016-2020 440

Average 281

Source

Blue Chip

212015 amp 1212014

rmaurer
Text Box


Expected




SampP 500 210 (b) 837 1047

= 1013




rmaurer
Text Box



Total 10000 818

Rate Base 17702965800$




Total 10000 796

Rate Base 17702965800$




Companys Claim

rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box




OCA-VI-14




OCA-VI-14

rmaurer
Text Box
rmaurer
Rectangle

Yahoo

MS

NM

oney

Morn

ing

Sta

r

Valu

eLin

e

Avera

ge

Company Symbol


Aqua America WTR 400 500 580 850 583




SJW Corp SJW 1400 NA 1400 700 1167


603

Source

Internet

January 28 2015


Source

rmaurer
Text Box

Average








ConnecticutWater


rmaurer
Text Box

Company Beta


Aqua America 070



Middlesex Water 070

SJW Corp 085

York Water 065


Source

Value Line

January 16 2015

rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 44169

Rm = 112511

Be = 07071

Re = 925


Blue Chip 212015 amp 1212014


rmaurer
Text Box







Average 442


rmaurer
Text Box


Expected

Market

Return







rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 28100

Rm = 101329

Be = 07071

Re = 799


Blue Chip 212015 amp 1212014


rmaurer
Text Box

Risk Free Rate


4Q 2014 228

1Q 2015 210

2Q 2015 230

3Q 2015 250

4Q 2015 270

1Q 2016 300

2Q 2016 320

2016-2020 440

Average 281

Source

Blue Chip

212015 amp 1212014

rmaurer
Text Box


Expected




SampP 500 210 (b) 837 1047

= 1013




rmaurer
Text Box



Total 10000 818

Rate Base 17702965800$




Total 10000 796

Rate Base 17702965800$




Companys Claim

rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box




OCA-VI-14




OCA-VI-14

rmaurer
Text Box
rmaurer
Rectangle

Average








ConnecticutWater


rmaurer
Text Box

Company Beta


Aqua America 070



Middlesex Water 070

SJW Corp 085

York Water 065


Source

Value Line

January 16 2015

rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 44169

Rm = 112511

Be = 07071

Re = 925


Blue Chip 212015 amp 1212014


rmaurer
Text Box







Average 442


rmaurer
Text Box


Expected

Market

Return







rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 28100

Rm = 101329

Be = 07071

Re = 799


Blue Chip 212015 amp 1212014


rmaurer
Text Box

Risk Free Rate


4Q 2014 228

1Q 2015 210

2Q 2015 230

3Q 2015 250

4Q 2015 270

1Q 2016 300

2Q 2016 320

2016-2020 440

Average 281

Source

Blue Chip

212015 amp 1212014

rmaurer
Text Box


Expected




SampP 500 210 (b) 837 1047

= 1013




rmaurer
Text Box



Total 10000 818

Rate Base 17702965800$




Total 10000 796

Rate Base 17702965800$




Companys Claim

rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box




OCA-VI-14




OCA-VI-14

rmaurer
Text Box
rmaurer
Rectangle

Company Beta


Aqua America 070



Middlesex Water 070

SJW Corp 085

York Water 065


Source

Value Line

January 16 2015

rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 44169

Rm = 112511

Be = 07071

Re = 925


Blue Chip 212015 amp 1212014


rmaurer
Text Box







Average 442


rmaurer
Text Box


Expected

Market

Return







rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 28100

Rm = 101329

Be = 07071

Re = 799


Blue Chip 212015 amp 1212014


rmaurer
Text Box

Risk Free Rate


4Q 2014 228

1Q 2015 210

2Q 2015 230

3Q 2015 250

4Q 2015 270

1Q 2016 300

2Q 2016 320

2016-2020 440

Average 281

Source

Blue Chip

212015 amp 1212014

rmaurer
Text Box


Expected




SampP 500 210 (b) 837 1047

= 1013




rmaurer
Text Box



Total 10000 818

Rate Base 17702965800$




Total 10000 796

Rate Base 17702965800$




Companys Claim

rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box




OCA-VI-14




OCA-VI-14

rmaurer
Text Box
rmaurer
Rectangle


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 44169

Rm = 112511

Be = 07071

Re = 925


Blue Chip 212015 amp 1212014


rmaurer
Text Box







Average 442


rmaurer
Text Box


Expected

Market

Return







rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 28100

Rm = 101329

Be = 07071

Re = 799


Blue Chip 212015 amp 1212014


rmaurer
Text Box

Risk Free Rate


4Q 2014 228

1Q 2015 210

2Q 2015 230

3Q 2015 250

4Q 2015 270

1Q 2016 300

2Q 2016 320

2016-2020 440

Average 281

Source

Blue Chip

212015 amp 1212014

rmaurer
Text Box


Expected




SampP 500 210 (b) 837 1047

= 1013




rmaurer
Text Box



Total 10000 818

Rate Base 17702965800$




Total 10000 796

Rate Base 17702965800$




Companys Claim

rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box




OCA-VI-14




OCA-VI-14

rmaurer
Text Box
rmaurer
Rectangle







Average 442


rmaurer
Text Box


Expected

Market

Return







rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 28100

Rm = 101329

Be = 07071

Re = 799


Blue Chip 212015 amp 1212014


rmaurer
Text Box

Risk Free Rate


4Q 2014 228

1Q 2015 210

2Q 2015 230

3Q 2015 250

4Q 2015 270

1Q 2016 300

2Q 2016 320

2016-2020 440

Average 281

Source

Blue Chip

212015 amp 1212014

rmaurer
Text Box


Expected




SampP 500 210 (b) 837 1047

= 1013




rmaurer
Text Box



Total 10000 818

Rate Base 17702965800$




Total 10000 796

Rate Base 17702965800$




Companys Claim

rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box




OCA-VI-14




OCA-VI-14

rmaurer
Text Box
rmaurer
Rectangle


Expected

Market

Return







rmaurer
Text Box


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 28100

Rm = 101329

Be = 07071

Re = 799


Blue Chip 212015 amp 1212014


rmaurer
Text Box

Risk Free Rate


4Q 2014 228

1Q 2015 210

2Q 2015 230

3Q 2015 250

4Q 2015 270

1Q 2016 300

2Q 2016 320

2016-2020 440

Average 281

Source

Blue Chip

212015 amp 1212014

rmaurer
Text Box


Expected




SampP 500 210 (b) 837 1047

= 1013




rmaurer
Text Box



Total 10000 818

Rate Base 17702965800$




Total 10000 796

Rate Base 17702965800$




Companys Claim

rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box




OCA-VI-14




OCA-VI-14

rmaurer
Text Box
rmaurer
Rectangle


Rf Risk-free rate



Re = Rf+Be(Rm-Rf)

Rf = 28100

Rm = 101329

Be = 07071

Re = 799


Blue Chip 212015 amp 1212014


rmaurer
Text Box

Risk Free Rate


4Q 2014 228

1Q 2015 210

2Q 2015 230

3Q 2015 250

4Q 2015 270

1Q 2016 300

2Q 2016 320

2016-2020 440

Average 281

Source

Blue Chip

212015 amp 1212014

rmaurer
Text Box


Expected




SampP 500 210 (b) 837 1047

= 1013




rmaurer
Text Box



Total 10000 818

Rate Base 17702965800$




Total 10000 796

Rate Base 17702965800$




Companys Claim

rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box




OCA-VI-14




OCA-VI-14

rmaurer
Text Box
rmaurer
Rectangle

Risk Free Rate


4Q 2014 228

1Q 2015 210

2Q 2015 230

3Q 2015 250

4Q 2015 270

1Q 2016 300

2Q 2016 320

2016-2020 440

Average 281

Source

Blue Chip

212015 amp 1212014

rmaurer
Text Box


Expected




SampP 500 210 (b) 837 1047

= 1013




rmaurer
Text Box



Total 10000 818

Rate Base 17702965800$




Total 10000 796

Rate Base 17702965800$




Companys Claim

rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box




OCA-VI-14




OCA-VI-14

rmaurer
Text Box
rmaurer
Rectangle


Expected




SampP 500 210 (b) 837 1047

= 1013




rmaurer
Text Box



Total 10000 818

Rate Base 17702965800$




Total 10000 796

Rate Base 17702965800$




Companys Claim

rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box




OCA-VI-14




OCA-VI-14

rmaurer
Text Box
rmaurer
Rectangle



Total 10000 818

Rate Base 17702965800$




Total 10000 796

Rate Base 17702965800$




Companys Claim

rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box




OCA-VI-14




OCA-VI-14

rmaurer
Text Box
rmaurer
Rectangle

rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box




OCA-VI-14




OCA-VI-14

rmaurer
Text Box
rmaurer
Rectangle

rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box




OCA-VI-14




OCA-VI-14

rmaurer
Text Box
rmaurer
Rectangle

rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box




OCA-VI-14




OCA-VI-14

rmaurer
Text Box
rmaurer
Rectangle

rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box




OCA-VI-14




OCA-VI-14

rmaurer
Text Box
rmaurer
Rectangle

rmaurer
Text Box
rmaurer
Text Box
rmaurer
Text Box




OCA-VI-14




OCA-VI-14

rmaurer
Text Box
rmaurer
Rectangle

rmaurer
Text Box
rmaurer
Text Box




OCA-VI-14




OCA-VI-14

rmaurer
Text Box
rmaurer
Rectangle

rmaurer
Text Box




OCA-VI-14




OCA-VI-14

rmaurer
Text Box
rmaurer
Rectangle




OCA-VI-14




OCA-VI-14

rmaurer
Text Box
rmaurer
Rectangle

Documents

I&E Exhibit No. 1 Witness: Rachel Maurer PENNSYLVANIA ... · I&E Exhibit No. 1 Witness: Rachel Maurer PENNSYLVANIA PUBLIC UTILITY COMMISSION v. UNITED WATER PENNSYLVANIA INC. Docket