We recently compiled a list of the 8 Best Momentum Stocks To Invest In Right Now. In this article, we are going to take a look at where Vistra Corp. (NYSE:VST) stands against the other momentum stocks.
U.S. Labor Market Remains Resilient
After the Fed’s rate cut and a positive inflation report, the latest jobs report also showed better-than-expected results. In an interview with Yahoo Finance, Elise Gould from the Economic Policy Institute discussed the latest employment data as she highlighted the continued strength of the U.S. labor market.
Payroll employment increased by 254,000 in September, with revisions adding 72,000 jobs from previous months. The unemployment rate remained stable at 4.1% and showed declines among various demographics, especially among men.
Gould emphasized that the prime-age employment-to-population ratio is at a 23-year high, which shows a strong economy. Despite wage growth reaching 4%, she downplayed concerns that this could lead to inflation and mentioned improvements in productivity and a low labor share of corporate income.
She expressed confidence in the labor market’s strength and suggested that it may influence the Fed’s decisions on interest rates. She also believes that the Fed should normalize rates, which remain high historically given current employment levels.
Gould observed that the overall labor market is strong, but not excessively heated, as shown by softer job turnover rates.
Economic Resilience and Its Impact on the Stock Market
At CNBC’s Closing Bell, Wharton finance professor Jeremy Siegel discussed the impact of the recent economic data on the stock market. He noted that while 550,000 jobs were added in the third quarter, wages remained flat, leading to a GDP growth projected at 2.5% to 3%.
Siegel believes that the Federal Reserve will likely implement smaller rate cuts of 25 basis points rather than larger cuts and will aim for a long-term neutral rate of about 3.5% by the second half of next year.
He expressed optimism regarding the stock market and suggested that the S&P 500 could reach 6,000 by year-end. However, he mentioned that higher yields may present challenges.
Despite concerns about equity valuations appearing high, Siegel pointed out that with cash still abundant and a resilient economy, the market remains attractive. He acknowledged that while the forward earnings ratio for the market is around 21.5x, it is not expensive in the current economic climate. He emphasized the absence of recession indicators and the potential for earnings growth and suggested that while significant market gains may not be expected, there is still room for growth.
Our Methodology
For this article, we looked at the October 2 holdings of iShares MSCI USA Momentum Factor ETF and narrowed our list to 8 stocks most widely held by institutional investors. The best momentum stocks to invest in are listed in ascending order of their hedge fund sentiment which was taken from Insider Monkey’s database of over 900 elite hedge funds.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Solar panel workers installing a new farm for clean energy generation.
Vistra Corp. (NYSE:VST)
Number of Hedge Fund Holders: 92
Vistra Corp. (NYSE:VST) is a prominent integrated retail electricity and power generation company that serves customers across the United States and ranks among the largest competitive power generators in the country. It ranks at 6 on our list of best momentum stocks.
The company has a capacity of about 41,000 megawatts, which is enough to power 20 million homes. It focuses on energy transformation through a diverse portfolio that includes natural gas, nuclear, coal, solar, and battery storage. It operates the second-largest fleet of nuclear power plants in the U.S. and focuses on sustainability by expanding its zero-carbon resources.
The company also adopts a customer-centric approach as it offers over 50 renewable energy plans to around 5 million retail customers. Vistra (NYSE:VST) aims for a 60% reduction in greenhouse gas emissions by 2030 and targets net-zero emissions by 2050.
The company is further expanding its portfolio by acquiring the remaining 15% equity interest in Vistra Vision LLC, currently held by Nuveen and Avenue, for a total cash purchase price of $3.248 billion. Vistra Vision LLC owns nuclear facilities like Beaver Valley, Comanche Peak, Davis-Besse, and Perry, totaling about 6.4 gigawatts in capacity.
In July, the company secured important regulatory approval to extend the Comanche Peak Nuclear Power Plant’s operational lifespan to 2053, which adds 20 years to its initial licenses. The facility, which has been operational since 1990, consists of two units with a combined capacity of 2,400 megawatts, and has produced over 582 million megawatt-hours of clean electricity.
Vistra (NYSE:VST) has been one of the top gainers of the S&P 500 in 2024 which has gained nearly 250%, as of October 3. The company has been justifying its stock price gains with its performance.
In Q2, despite lower wholesale energy prices, the company’s diversified portfolio achieved record power production and solid retail growth. The company reaffirmed its 2024 adjusted EBITDA guidance of $4.550 billion to $5.050 billion and projected potential benefits from the nuclear production tax credit.
For 2025, the company raised its estimated adjusted EBITDA midpoint range by $200 million due to favorable market conditions and hedging strategies. It is also a shareholder-friendly company that has returned about $5 billion to investors since late 2021. Vistra (NYSE:VST) plans to continue share buybacks of at least $2.25 billion through 2025.
Fidelity Growth Strategies Fund stated the following regarding Vistra Corp. (NYSE:VST) in its Q2 2024 investor letter:
“An overweight stake in utility company Vistra Corp. (NYSE:VST) (+24%) was the top individual relative contributor. In Q1, the Texas-based independent power producer completed its acquisition of Ohio-based nuclear fleet operator Energy Harbor. The new Vistra, with its expanded geographic footprint, is in strong position to gain from the buildout of AI-capable data centers, which require enormous amounts of power to run. It is expected that local grids in the U.S. will need to invest heavily over the coming years to improve their power infrastructure and meet growing demand. In the nearer term, firms may choose to contract with independent power producers, like Vistra, rather than rely on the local provider.”
Overall VST ranks 6th on our list of the best momentum stocks to buy. While we acknowledge the potential of VST 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 VST but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.