In this article, we will take a look at the 5 Best Utility Stocks to Buy Now According to Hedge Funds. For a deeper discussion and analysis, please refer to the 12 Best Utility Stocks to Buy Now According to Hedge Funds.
5. American Electric Power Company, Inc. (NASDAQ:AEP)
Number of Hedge Fund Holders: 62
American Electric Power Company, Inc. (NASDAQ:AEP) is one of the nation’s largest electricity producers with approximately 29 GW of diverse generating capacity.
On June 24, Morgan Stanley lifted its price objective on American Electric Power Company, Inc. (NASDAQ:AEP) from $129 to $136 and reiterated its ‘Overweight’ rating on the stock. The target boost still represents a downside of 2% from the current levels.
Morgan Stanley revised its price estimates for the North American Regulated & Diversified Utilities / IPPs as part of its monthly update. The analyst firm noted that the broader utilities sector declined by 5.5% last month, sharply lagging behind the 5.1% gains posted by the overall S&P over the same period.
On the other hand, Ladenburg turned slightly bearish on American Electric Power Company, Inc. (NASDAQ:AEP) on June 18 and trimmed its price target on the stock by $5 (read more details here).
American Electric Power continues to ride the AI boom and signed 7 GW of new large energy project agreements during the first quarter. The utility’s incremental load is expected to grow to 63 GW by 2030, with nearly 90% of it coming from data centers. As a result, it raised its five-year CapEx plan from $72 billion to $78 billion, and also increased its expected long-term operating earnings CAGR to greater than 9%.
4. NextEra Energy, Inc. (NYSE:NEE)
Number of Hedge Fund Holders: 74
With a market cap of over $184 billion as of the writing of this article, NextEra Energy, Inc. (NYSE:NEE) is the most valuable utility company in the world. The company boasts a diverse mix of energy sources, including natural gas, nuclear, renewable energy, and battery storage.
On June 25, Erste Group downgraded NextEra Energy, Inc. (NYSE:NEE) from ‘Buy’ to ‘Hold’, without assigning the stock a price target.
The analyst firm cited the sharp YoY increase in NextEra’s long-term liabilities for the downgrade. It is expected that the Federal Reserve’s next monetary policy move will be an interest rate hike, which will further raise financing costs in the medium term. According to Erste Group, this reduces the possibility of positive earnings surprises from the utility.
On the other hand, earlier on Jun 17, Bernstein launched coverage of NextEra Energy, Inc. (NYSE:NEE) with an ‘Outperform’ rating and a price objective of $107, indicating an upside of over 21% from the current levels (read more details here).
NextEra Energy, Inc. (NYSE:NEE) is targeting adjusted earnings in the range of $3.92 to $4.02 per share for FY 2026, indicating a YoY growth of 7% at the midpoint. The company expects to grow its adjusted EPS at a CAGR of 8% plus through 2032, and is targeting the same from 2032 through 2035, all off the 2025 base of $3.71.
3. Constellation Energy Corporation (NASDAQ:CEG)
Number of Hedge Fund Holders: 79
Constellation Energy Corporation (NASDAQ:CEG) is the largest provider of clean, low-carbon energy in the United States. The company also operates the largest fleet of nuclear facilities in the country.
On June 24, Morgan Stanley upped its price target on Constellation Energy Corporation (NASDAQ:CEG) from $359 to $364, while maintaining its ‘Overweight’ rating on the stock. The target boost reflects a significant upside of almost 38% from the current levels.
The analyst firm refreshed its valuation estimates for North American regulated utilities, diversified utilities, and independent power producers (IPPs) in its latest sector update. The firm noted that utility stocks significantly underperformed the broader market in May, with the sector falling by 5.5% while the overall S&P gained roughly 5.1% during the month.
Constellation Energy Corporation (NASDAQ:CEG) also made headlines on June 23 when the company signed a long-term deal with Walmart to provide electricity from its Dresden Clean Energy Center in Illinois, marking the retail behemoth’s first purchase of nuclear energy. While nuclear has been high in demand by data center operators, the agreement with Walmart indicates that other sectors are also now interested in clean energy that is available around the clock.
2. Talen Energy Corporation (NASDAQ:TLN)
Number of Hedge Fund Holders: 85
Talen Energy Corporation (NASDAQ:TLN) is a leading independent power producer and energy infrastructure company that owns and operates nearly 16 GW of power infrastructure in the United States.
On June 23, Jefferies downgraded Talen Energy Corporation (NASDAQ:TLN) from ‘Buy’ to ‘Hold’, but boosted its price objective on the stock from $409 to $453. The revised target reflects an upside of over 12% from the current price level.
According to Jefferies, the downgrade was driven by valuation. TLN soared by over 30% between June 10 and June 22, and the analyst believes that the recent outperformance has left the stock fairly valued. Moreover, the firm also sees a more challenging outlook for securing contracts for existing gas-fired power plants.
Talen Energy Corporation (NASDAQ:TLN) garnered significant investor attention on June 15 when the company announced that it had completed the acquisition of the Lawrenceburg Power Plant in Indiana and the Waterford Energy Center and Darby Generating Station in Ohio from Energy Capital Partners. The strategic move has expanded the utility’s portfolio to nearly 16 GW, of which 35% stems from combined-cycle gas turbine (CCGT) power plants.
Terry Nutt, President of Talen Energy Corporation (NASDAQ:TLN), commented:
“We are pleased to complete this strategic acquisition. These assets add efficient baseload generation to our portfolio, expand our presence in the western PJM market, and further diversify our fleet. The acquisition is immediately accretive, adding over 15% to our cash flow per share, and strengthens our line of sight to delivering more than $40 per share of annual free cash flow by 2028. We look forward to the contributions the plants and their teams will make as part of Talen.”
1. Vistra Corp. (NYSE:VST)
Number of Hedge Fund Holders: 106
Topping our list of the Best Utility Stocks is Vistra Corp. (NYSE:VST), one of the largest competitive power generators in the United States. The company operates a power generation fleet of natural gas, nuclear, coal, solar, and battery energy storage facilities in the country.
On June 24, Morgan Stanley analyst David Arcaro trimmed the firm’s price objective on Vistra Corp. (NYSE:VST) from $212 to $210, but reaffirmed an ‘Overweight’ rating on the shares. The lowered target still implies an upside of more than 28% from the current price level.
In its latest sector review, Morgan Stanley revised its price targets across North American Regulated & Diversified Utilities / IPPs for May. The analyst firm pointed out that the overall utilities sector fell by 5.5% last month, a sharp contrast to the broader market, as the S&P gained approximately 5.1% over the same period.
Meanwhile, Bernstein analyst Sunaina Ocalan initiated coverage of Vistra Corp. (NYSE:VST) on June 18 with an ‘Outperform’ rating and $187 price target. The analyst believes that Vistra’s diverse generation portfolio positions it to capitalize on the soaring power demand, creating a “double-barreled earnings event” (read more details here).
While we acknowledge the potential of VST to grow, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an AI stock that is more promising than VST and that has 100x upside potential, check out our report about the cheapest AI stock.
READ NEXT: 13 Best Electrical Infrastructure Stocks to Buy in 2026 and 12 Best American Oil Stocks to Buy Now
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