Lighting up a portfolio.

Doris Kelley-Watkins has some electrifying utility picks

When it comes to utility stocks, some still think of them as boring, staid investments with little juice. But Doris A. Kelley-Watkins, senior vice president and portfolio manager with Evergreen Asset Management in White Plains, New York, says her favorite stocks in that industry aren't your father's utility companies.

For one thing, deregulation of the power industry has jolted investor-owned utilities into competing more vigorously, says Kelley-Watkins, manager of the $135 million Evergreen Utility fund (Nasdaq: EVUAX). Further, utilities represent a much broader spectrum in the market, including wireless telecommunications and power generation firms.

"In 2000, the utility industry has changed and so has the utility investor," says Kelley-Watkins. And in picking utility stocks, she bets on companies that can handle increased competition and react quickly in this new environment.

Kelley-Watkins also notes that the increasing pace of consolidation in the industry has powered her portfolio higher as a number of stocks--including some of her Private Screening picks--will be acquired at rich premiums. And she also invests about 5% of her portfolio in convertible preferred bonds, securities exchangeable for stock.

As a result, Kelley-Watkins's Evergreen Utility fund has garnered a 33.4% cumulative total return in 1999, more than double the 15.2% average return of its peers, according to Chicago-based mutual fund research firm Morningstar.

Kelley-Watkins likes Teleglobe (NYSE: TGO), a Quebec, Canada, operator and provider of intercontinental-telecommunications networks, voice and data services, including broadband services, all fast-growing businesses. Another plus: Bell Canada (Nasdaq: BCICF) is acquiring Teleglobe for $6.7 billion to add its global infrastructure capabilities to Bell Canada's domestic business.

Then there's Scottish Power (NYSE: SPI), which Kelley-Watkins owns because she had a stake in Pacificorp, purchased by SPI last year. Pacificorp operates in seven states such as Montana and Wyoming, giving the Glasgow, Scotland, multi-utility firm a toehold in the U.S. Also, SPI owns interests in the Internet through the acquisition of Thus, a London-based Web-page design company.

Kelley-Watkins favors Calpine (NYSE: CPN), because it's a utility without borders. The San Jose, California, developer and operator of power generation facilities offers low-cost electricity in underserved areas across the country. Calpine owns interests in 40 power plants nationwide, providing about 4,200 megawatts of power, and is in the process of adding more plants to its portfolio. Its goal: provide 25,000 megawatts around the clock by 2004.

Houston-based Crown Castle International (Nasdaq: TWRS) owns, operates and builds wireless-communications towers. The company should benefit from the explosion in wireless phone service, she says. Thus far, there's only about a 40% penetration in this country, lower than wireless usage in other parts of the world.

Shares of Denver-based U.S. West (NYSE: USW), a Regional Bell Operating Co., should take off now that its merger with Qwest Communications International (NYSE: Q) is back on track after Deutsche Telekom (NYSE: DT) recently withdrew its unsolicited bid to acquire both companies.

Powerful Picks

Company                           12-Month     P/E on Projected
Exchange: Symbol     Price(*)   Price Target    2000 Earnings

Calpine               $94.00        150              45.2
NYSE: CPN

Crown Castle Int'l     37.88         47               N/A
NYSE: TWRS

Scottish Power         31.69         35              11.8
NYSE: SPI

Teleglobe              27.50         50              74.3
Nasdaq: TGO

U.S. West              72.63         85              21.2
NYSE: USW

                     Est. 5-Yr.
Company              Annual EPS
Exchange: Symbol       Growth     Why Stock Will Outperform

Calpine                 30.5%     * Aggressive plan to generate
NYSE: CPN                           25,000 megawatts of power
                                    by 2004 across the country
                                    to boost earnings

Crown Castle Int'l      52.7      * Explosive growth in wireless
NYSE: TWRS                          phone service key for
                                    operator of cell-phone
                                    towers

Scottish Power           4.0      * Acquisitions of fast-growth
NYSE: SPI                           businesses like Web page
                                    hosting companies to lift
                                    revenues

Teleglobe               24.0      * Shares of international
Nasdaq: TGO                         global network to jump after
                                    buyout by Bell Canada

U.S. West                7.1      * Merger with Qwest has the
NYSE: USW                           green light; resulting
                                    company will have dominant
                                    presence among telecoms in
                                    the west

(*) Closing price as of 03/31/00

Source: Doris Kelley-Watkins, Evergreen Asset Management; Yahoo! Finance.