NV Energy, Inc. (NVE), The Southern Company (SO): Buffett Is Buying Into Utilities, Should You?

There’s more to like, however. For example, the Fort Bliss military base has tripled in size over the past decade or so and is being considered as an Air Force training center. As the base increases in size and importance, it will draw more residents and use more electricity, boosting El Paso’s results.

Moreover, Mario Gabelli reports that “only 35% of El Paso residences have refrigerated air conditioning,” but almost all new construction includes central air. Thus, new homes being built to house new residents are going to be using more power than the current housing stock. That’s an added boost to El Paso’s growth prospects.

El Paso only recently started to pay a dividend, so it doesn’t have the impressive dividend history that Southern offers. Moreover, investors appear to be pricing in a higher growth rate. So it only yields around 3%, even after the pullback. Growth minded investors might be interested now, but yield seeking investors should probably wait for a yield in the 4% range.

Buffett Watching

Although no investor can do what Buffett does, watching his moves is pretty much an investment pastime. The purchase of NV Energy suggests that there is long-term value in the utility sector. You just need to look in the right places. El Paso and Southern are two good utilities to keep an eye on.

Reuben Brewer has no position in any stocks mentioned. The Motley Fool recommends Southern Company.

The article Buffett Is Buying Into Utilities, Should You? originally appeared on Fool.com and is written by Reuben Brewer.

Reuben is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.