UBS’ Bottom Quant Stocks In AI, IT, Healthcare & Others: 29 Stocks In All Sectors

1. The Southern Company (NYSE:SO)

Number of Hedge Fund Investors In Q2 2024: 32

Sector: Utilities

The Southern Company (NYSE:SO) is one of the biggest regulated utilities in the US. This provides it with a hedge against the ups and downs of the energy markets since the firm’s rates are fixed by regulators. It also means that The Southern Company (NYSE:SO) depends on its ROE on regulators, and any troubles on this front can significantly impact the firm’s operations and by extension, its share price. On this front, The Southern Company (NYSE:SO)’s dealings with Georgia’s regulators for help in recovering the $1.1 billion costs that it faced due to Hurricane Helene are quite important. Additionally, the firm also generates power through nuclear energy, which could create a catalyst for it to target the growing demand for nuclear power from the data center industry.

The Southern Company (NYSE:SO)’s management commented on its nuclear outlook during the Q3 2024 earnings call. Here is what they said:

“It’s — at the end of the day, it’s reflecting and projecting out scenarios under various moving parts, environmental rules, the cost of natural gas over time, the cost of capital over time. And those scenarios are solving for the most economic, reliable way to serve customers in the long term. Is it possible that one of those scenario model runs, spits out a nuclear uprate or a new nuclear unit as the solution in the model? Sure, it might. Does that mean that’s a recommendation? No. Does that mean that’s a path we’ve embarked on?

No. Does that mean it’s an option that is worth preserving and considering down the road? Of course, it is. But there’s a lot that’s going to take place before we get to that point. And that’s, I think, what you hear a lot of us in the industry talking about. Aq New nuclear is super important for them for this country, but in order to get to the right place, there’s got to be better risk mitigation than exists today. That’s got to come from changes with the federal government, that could come from some of these conversations with these large technology companies. We’re talking to as many of these companies as anyone. I’d argue we’re having conversations with the majority of them, not just around nuclear, just around different ways to solve for this load equation.”

SO is a stock with the least improving technical indicators according to UBS. While we acknowledge the potential of SO as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than SO but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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