In this article, we discuss the 10 best electric utility stocks to buy now.
The economic fallout from the Covid-19 pandemic created problems for many industries from the sharp decline in demand in the tourism industry to supply chain downfalls causing chip shortages around the world. However, the utility companies somewhat resisted the recession brought on by the economic downfall although the demand for electricity fell sharply across the globe. In its Covid-19 impact on electricity report at the end of 2020, The International Energy Agency confirmed that the weather-adjusted electricity demand is above the 2019 levels.
In its 2021 outlook on power and utilities industry, Deloitte notes the increased electrification of the global economy as automakers shift to electric vehicle productions, tech companies helping traditional units for electricity consumption become distributed energy resources (DER). Regarding the renewable transition, Deloitte notes that power and utility industry executives think that the industry should focus on decarbonization and digitalization strategies. In that regard, the U.S. Energy Information Agency notes that 20% of the U.S. electricity production in 2020 came from renewables but also notes that 39.7 gigawatts of generating capacity planned for 2021 will come overwhelmingly from renewables – solar energy accounts for 39% while wind will be the next 31%.
Thus, the electric utility companies are increasingly turning towards renewables for electricity production. Some industry examples include NextEra Energy, Inc. (NYSE:NEE) and Vistra Corp. (NYSE:VST). NextEra Energy, Inc. (NYSE:NEE) claims to be the world’s largest wind and solar energy producer and has invested around $90 billion in renewable energy in the past decade. Vistra Corp. (NYSE:VST) boasts the world’s largest battery energy storage providing renewable energy to California. These efforts seem to have caught the eye of many hedge funds as both NextEra Energy, Inc. (NYSE:NEE) and Vistra Corp. (NYSE:VST) are among the top five utility companies by the number of hedge fund holders in the list of hedge funds tracked by Insider Monkey.
The decarbonization efforts have also taken place in the nonrenewable energy sector, in particular with the development of nuclear power plants. The Vogtle nuclear power plant in Georgia by The Southern Company (NYSE:SO) will provide the 3% of the 39.7 gigawatts in 2021 as noted by the U.S. Energy Information Agency.
In addition, some electric utility companies have been providing DER solutions. One such example includes Duke Energy Corporation (NYSE:DUK) which has approximately 1000 distributed energy generation solutions – with some up to 40 megawatts – across the U.S.
Although energy price fluctuations and regulatory uncertainties might change the short-term outlook, there is a clear long-term trend pushing decarbonization across industries, prominently in the electric utility industry.
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While the electric utility companies are investing in and transitioning to renewables and the hedge funds seem to be investing heavily in this decarbonization trend, the entire hedge fund industry is still feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and May 29th 2021 our monthly newsletter’s stock picks returned 206.8%, vs. 91% for the SPY. Our stock picks outperformed the market by more than 115 percentage points (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
With this context in mind, here is our list of the 10 best electric utility stocks to buy now. These companies were ranked keeping in mind the basic business fundamentals, hedge fund sentiment, and analyst ratings for each.
10 Best Electric Utility Stocks to Buy Now
10. Evergy, Inc. (NYSE: EVRG)
Number of Hedge Fund Holders: 30
Evergy, Inc. (NYSE:EVRG) is a Kansas and Missouri-based electric utility company serving 1.6 million customers. It is ranked tenth on our list of 10 best electric utility stocks to buy now. The stock has returned over 3.63% to investors over the course of the past year.
On May 6, Evergy, Inc. (NYSE:EVRG) posted earnings for the first quarter of 2021, reporting earnings per share of $0.55, beating estimates by $0.07. The revenue over the period was around $1.61 billion, up 44.34% year-over-year.
At the end of the first quarter of 2021, 30 hedge funds in the database of Insider Monkey held stakes worth $1.2 billion in Evergy, Inc. (EVRG).
On July 7, Seaport Global gave a Buy rating to Evergy, Inc. (NYSE:EVRG) with a $68 price target, arguing for the probability of a compound annual growth rate of 7% in EPS.
Also, on June 15, Goldman Sachs raised the rating on Evergy, Inc. (NYSE:EVRG) with a $72 price target, citing favorable changes in the regulatory environment in Missouri and Kansas.
Just like NextEra Energy, Inc. (NYSE: NEE), The Southern Company (NYSE:SO), and Duke Energy Corporation (NYSE:DUK), Evergy, Inc. (NYSE:EVRG) is one of the best electric utility stocks to buy now.
9. American Electric Power Company, Inc. (NASDAQ: AEP)
Number of Hedge Fund Holders: 32
American Electric Power Company, Inc. (NASDAQ:AEP) is an electric utility company operating in 11 states and serving more than 5 million customers. It is ranked ninth on our list of 10 best electric utility stocks to buy now. The stock has returned over 7.36% to investors over the course of the past year.
On July 22, American Electric Power Company, Inc. (NASDAQ:AEP) posted earnings for the second quarter of 2021, reporting earnings per share of $1.18, beating estimates by $0.04. The revenue over the period was around $3.83 billion, up 9.93% year-over-year.
At the end of the first quarter of 2021, 32 hedge funds in the database of Insider Monkey held stakes worth $809 million in American Electric Power Company, Inc. (NASDAQ:AEP). Out of the hedge funds being tracked by Insider Monkey, Israel Englander’s Millennium Management has the most valuable stake in American Electric Power Company, Inc. (NASDAQ:AEP) as of the end of the first quarter of 2021, worth close to $260 million, comprising 0.18% of its total 13F portfolio.
On July 26, BofA raised its rating on American Electric Power Company, Inc. (NASDAQ: AEP) to Buy from Hold while keeping the $97 price target. BofA highlighted the undervaluation of the renewables transition American Electric Power Company, Inc. (NASDAQ:AEP).
8. CMS Energy Corporation (NYSE: CMS)
Number of Hedge Fund Holders: 28
CMS Energy Corporation (NYSE:CMS) is a Michigan-based energy company active in electricity and natural gas utilities, serving more than 6 million residents in Michigan. It is ranked eighth on our list of 10 best electric utility stocks to buy now. The stock has returned over 0.37% to investors over the course of the past year.
On April 29, CMS Energy Corporation (NYSE:CMS) posted earnings for the first quarter of 2021, reporting earnings per share of $1.21, beating estimates by $0.07. The revenue over the period was around $2.08 billion, up 11.75% year-over-year.
At the end of the first quarter of 2021, 28 hedge funds in the database of Insider Monkey held stakes worth $955 million in CMS Energy Corporation (NYSE: CMS), up from 24 the preceding quarter worth $580 million.
On July 20, KeyBanc raised its rating on CMS Energy Corporation (NYSE:CMS) to Overweight from Sector Weight, giving a $67 price target. KeyBanc noted that CMS Energy Corporation (NYSE:CMS) has growth prospects and the latest challenges brought on by the sale of Enerbank will be transitory.
CMS Energy Corporation (NYSE:CMS) is one of the best electric utility stocks to buy now, alongside NextEra Energy, Inc. (NYSE:NEE), The Southern Company (NYSE:SO), and Duke Energy Corporation (NYSE:DUK).
Miller/Howard Investments, an investment management firm, mentioned CMS Energy Corporation (NYSE:CMS) in its Q1 2021 investor letter. Here is what is what the fund said:
”We added CMS Energy Corp. (CMS), a name poised to benefit from above-average earnings growth. We initiated a position in this high-quality utility after a period of relative weakness in which its premium to the group narrowed.”
7. Vistra Corp. (NYSE: VST)
Number of Hedge Fund Holders: 46
Vistra Corp. (NYSE:VST) is a Texas-based electricity utility company serving 5 million customers in 20 states. It is ranked seventh on our list of 10 best electric utility stocks to buy now. The stock has returned over 5.88% to investors over the course of the past year.
On May 4, Vistra Corp. (NYSE:VST) posted earnings for the first quarter of 2021, reporting earnings per share of -$2.89, missing estimates by $0.85. The revenue over the period was around $3.21 billion, up 12.21% year-over-year.
At the end of the first quarter of 2021, 46 hedge funds in the database of Insider Monkey held stakes worth $1.25 billion in Vistra Corp. (NYSE: VST), up from 39 the preceding quarter worth $1.36 billion.
On July 22, BofA raised its rating on Vistra Corp. (NYSE:VST) to Buy from Neutral while boosting its price target to $23 from $17, noting that Vistra Corp. (NYSE:VST) has been benefiting greatly from strong prices for power and gas.
6. Dominion Energy, Inc. (NYSE: D)
Number of Hedge Fund Holders: 39
Dominion Energy, Inc. (NYSE:D) is a Virginia-based electric and natural gas utilities company, serving 7 million customers in 16 states. It is ranked sixth on our list of 10 best electric utility stocks to buy now. The stock has returned around -4.23% to investors over the course of the past year.
On May 4, Dominion Energy, Inc. (NYSE:D) posted earnings for the first quarter of 2021, reporting earnings per share of $1.09, beating estimates by $0.01. The revenue over the period was around $3.87 billion, down 13.92% year-over-year.
At the end of the first quarter of 2021, 39 hedge funds in the database of Insider Monkey held stakes worth over $1.29 billion in Dominion Energy, Inc. (NYSE:D). Out of the hedge funds being tracked by Insider Monkey, Diamond Hill Capital has the most valuable stake in Duke Energy Corporation (NYSE:DUK) as of the end of the first quarter of 2021, worth close to $259 million, comprising 1.04% of its total 13F portfolio.
On July 6, Scotiabank raised the rating on Dominion Energy, Inc. (NYSE:D) to Outperform from Sector Perform and gave a $92 price target, noting that Dominion Energy, Inc. (NYSE:D) is discounted as regulatory uncertainties linger.
Along with NextEra Energy, Inc. (NYSE:NEE), The Southern Company (NYSE:SO), and Duke Energy Corporation (NYSE:DUK), CMS Energy Corporation (NYSE:CMS) is one of the best electric utility stocks to buy now.
5. NRG Energy, Inc. (NYSE: NRG)
Number of Hedge Fund Holders: 35
NRG Energy, Inc. (NYSE: NRG) is a Texas-based electric utility company serving 2.9 retail customers in Texas and the Northeast. It is ranked fifth on our list of 10 best electric utility stocks to buy now. The stock has returned over 21.96% to investors over the course of the past year.
On May 6, NRG Energy, Inc. (NYSE: NRG) posted earnings for the first quarter of 2021, reporting earnings per share of $0.24, missing estimates by $0.05. The revenue over the period was around $8.09 billion, up 300.74% year-over-year.
At the end of the first quarter of 2021, 35 hedge funds in the database of Insider Monkey held stakes worth $1.61 billion in NRG Energy, Inc. (NYSE: NRG), up from 31 the preceding quarter worth $1.47 billion.
On June 27, Goldman Sachs raised its rating on NRG Energy, Inc. (NYSE: NRG) to Conviction Buy from a Buy while raising its price target to $57 from $46. Goldman Sachs noted the retail business of NRG Energy, Inc. (NYSE: NRG), predicting strong free cash flows in 2022 and 2023.
4. FirstEnergy Corp. (NYSE: FE)
Number of Hedge Fund Holders: 51
FirstEnergy Corp. (NYSE: FE) is an Ohio-based electric utility company serving 6 million customers and has a generation capacity of more than 16000 megawatts. It is ranked fourth on our list of 10 best electric utility stocks to buy now. The stock has returned over 32.75% to investors over the course of the past year.
On July 22, FirstEnergy Corp. (NYSE: FE) posted earnings for the second quarter of 2021, reporting earnings per share of $0.59, beating estimates by $0.03. The revenue over the period was around $2.62 billion, up 3.97% year-over-year.
At the end of the first quarter of 2021, 51 hedge funds in the database of Insider Monkey held stakes worth $1.84 billion in FirstEnergy Corp. (NYSE: FE), up from 50 the preceding quarter worth $1.31 billion. Out of the hedge funds being tracked by Insider Monkey, billionaire Carl Icahn’s Icahn Capital LP has initiated a stake in FirstEnergy Corp. (NYSE: FE) in the first quarter of 2021. As of the end of the first quarter of 2021, this stake was worth close to $658 million, comprising 2.75% of its total 13F portfolio.
On July 22, Morgan Stanley raised its price target on FirstEnergy Corp. (NYSE: FE) to $46 from $45 while keeping its Overweight rating after a litigation settlement agreement with the Department of Justice was announced with a lower-than-expected penalty of $230.
3. Duke Energy Corporation (NYSE: DUK)
Number of Hedge Fund Holders: 34
Duke Energy Corporation (NYSE: DUK) is a North Carolina-based electric and natural gas utilities company serving 7.2 million customers. It has 58200 megawatts It is ranked third on our list of 10 best electric utility stocks to buy now. The stock has returned over 30.84% to investors over the course of the past year.
On May 10, Duke Energy Corporation (NYSE: DUK) posted earnings for the first quarter of 2021, reporting earnings per share of $1.26, beating estimates by $0.05. The revenue over the period was around $6.15 billion, up 3.38% year-over-year.
At the end of the first quarter of 2021, 34 hedge funds in the database of Insider Monkey held stakes worth $602 million in Duke Energy Corporation (NYSE: DUK). Out of the hedge funds being tracked by Insider Monkey, D. E. Shaw has the most valuable stake in Duke Energy Corporation (NYSE: DUK) as of the end of the first quarter of 2021, worth close to $133 million, comprising 0.12% of its total 13F portfolio.
On June 25, Argus raised its rating on Duke Energy Corporation (NYSE: DUK) to Buy from Hold and gave the company a $106 price target, noting its strong first quarter earnings as well as its dividend yield of 3.9%.
2. The Southern Company (NYSE: SO)
Number of Hedge Fund Holders: 35
The Southern Company (NYSE: SO) is a Georgia-based electric and gas utility company serving 9 million customers in 6 states. It is ranked second on our list of 10 best electric utility stocks to buy now. The stock has returned over 18.95% to investors over the course of the past year.
On July 29, The Southern Company (NYSE: SO) posted earnings for the second quarter of 2021, reporting earnings per share of $0.84, beating estimates by $0.06. The revenue over the period was around $5.20 billion, up 12.6% year-over-year.
At the end of the first quarter of 2021, 35 hedge funds in the database of Insider Monkey held stakes worth $464 million in The Southern Company (NYSE: SO), up from 32 the preceding quarter worth $400 million.
Out of the hedge funds being tracked by Insider Monkey, billionaire Ken Fisher’s Fisher Asset Management has increased its stake in The Southern Company (NYSE: SO) in the second quarter of 2021 by 5% to $4.8 million.
Moreover, John Overdeck and David Siegel’s Two Sigma Advisors has increased their stake in The Southern Company (NYSE: SO) in the first quarter of 2021 by 88% to close to $107 million, comprising 0.29% of its total 13F portfolio. This stake is the most valuable position in The Southern Company (NYSE: SO) for the hedge funds being tracked by Insider Monkey, as of the end of the first quarter of 2021.
1. NextEra Energy, Inc. (NYSE: NEE)
Number of Hedge Fund Holders: 63
NextEra Energy, Inc. (NYSE: NEE) is a Florida-based electric utility company. Its Florida Power & Light Company serves more than 11 million customers. It is ranked first on our list of 10 best electric utility stocks to buy now. The stock has returned over 12.18% to investors over the course of the past year.
On July 23, NextEra Energy, Inc. (NYSE: NEE) posted earnings for the second quarter of 2021, reporting earnings per share of $0.71, beating estimates by $0.02. The revenue over the period was around $3.93 billion, down 6.59% year-over-year.
At the end of the first quarter of 2021, 63 hedge funds in the database of Insider Monkey held stakes worth $2.73 billion in NextEra Energy, Inc. (NYSE: NEE), up from 61 the preceding quarter worth $3.08 billion. Out of the hedge funds being tracked by Insider Monkey, billionaire Ken Fisher’s Fisher Asset Management has the most valuable stake in NextEra Energy, Inc. (NYSE: NEE), worth close to $1.03 billion, comprising 0.72% of its total 13F portfolio.
On July 13, Credit Suisse gave NextEra Energy, Inc. (NYSE: NEE) an Outperform rating with a price target of $85.
You can also take a peek at 15 Best Value Stocks to Invest In and 10 Best Dividend Contenders to Buy in 2021.
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Disclose. None. 10 Best Electric Utility Stocks to Buy Now is originally published on Insider Monkey.
