In this piece we will take a look at the fifteen best utility stocks to invest in. If you want to skip our introduction and jump straight ahead to the top five stocks in this list, then head on over to the 5 Best Utility Stocks To Invest In.
The ongoing worrisome state of the U.S. economy has had a devastating effect on major stock market indexes, as shares of companies both small and large have taken vicious beatings. The fragile state of the economy that was preparing itself for the Federal Reserve's decision to increase interest rates for combating inflation was exacerbated when Russia decided to invade Ukraine — an event that upended commodities markets and saw global crude oil prices shoot to record high levels.
At this point, most retail investors are wary of investing due to worries of further share price drops. However, given the nature of the current economic environment, not all stocks are risky bets. Due to the fact that the demand for energy is high and its supply is affected by geopolitical crises, some sectors do stand the chance of weathering the stock market storm.
One such sector is utilities. It consists of companies that are broadly involved in selling or managing energy, or are involved in other services such as water supplies and sewage management. Due to the nature of their operations, products and customer bases, these companies are considered to be some of the safest to invest in, as they remain relatively insulated to broad market downturns that often end up decimating other riskier sectors such as information technology and consumer electronics.
The safety of these stocks is evidenced by the fact that the Utilities Select Sector SPDR Fund, which is an exchange traded fund that consists of utility companies, has performed significantly better than more popular indexes such as the NASDAQ and NYSE. While the NASDAQ and NYSE are down by 27% and 14% year to date, this fund is down only by 4%.
However, just as every decision has its risks, similarly, the utility sector is not free from caveats of its own. Given its nature, share prices as a whole are unlikely to massively grow, and the companies themselves are (like all others) prone to management errors. Additionally, the push for renewables is a key factor that will affect these companies. Stable dividends also make utilities stocks attractive, especially during times of financial volatility and inflation.
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In order to pick out the top utility stocks for you, we took a broad look at the industry to determine which major political, technological and other factors are in play. After this, we scanned the different companies out there to gauge a mismatch or match between them and the factors identified. This allowed us to narrow down the list of good companies, following which they were analyzed through their analyst coverage, investor letters, large shareholders, and Insider Monkey's 912 hedge fund survey for the first quarter of this year.
Best Utility Stocks To Invest In
15. Black Hills Corporation (NYSE:BKH)
Number of Hedge Fund Holders: 16
Black Hills Corporation (NYSE:BKH) is an American utility company headquartered in South Dakota. It is responsible for supplying natural gas and electricity to users in several U.S. states. The company has more than a million gas and electricity customers across America and it also generates more than one thousand megawatts of electricity.
As is the case with utility companies, Black Hills Corporation (NYSE:BKH) is one of the most stable firms out there which has grown its dividend consistently over five decades. Additionally, the ongoing crisis in Ukraine is believed by many to have positive regulatory impacts on natural gas, and since the firm is an entrenched player in this space, it can positively benefit from these changes, particularly since natural gas is a cleaner fuel when compared to others such as coal and diesel.
Insider Monkey scanned 912 hedge fund portfolios for the first quarter of this year, out of which 16 had bought Black Hills Corporation (NYSE:BKH)'s shares. Mizuho increased its price target to $76 from $71 in May 2022, as it implied that the company is fairly valued at current levels.
Black Hills Corporation (NYSE:BKH)'s largest investor is Phill Gross and Robert Atchinson's Adage Capital Management which owns 535,000 shares that are worth $41 million.
Black Hills Corporation (NYSE:BKH) joins NextEra Energy, Inc. (NYSE:NEE), Vistra Corp. (NYSE:VST), and Constellation Energy Corporation (NASDAQ:CEG) in our list of top utility stocks.
14. IDACORP, Inc. (NYSE:IDA)
Number of Hedge Fund Holders: 16
IDACORP, Inc. (NYSE:IDA) is an electricity provider that operates both coal powered and hydroelectric power plants in the United States. The company also transmits its electricity to retail, commercial, and industrial customers. It is headquartered in Boise, Idaho, which is a key differentiating factor as you'll find out below.
16 out of the 912 hedge funds part of Insider Monkey's Q1 2022 poll had invested in the company, as of the end of the first quarter.
While IDACORP, Inc. (NYSE:IDA) is one of the smaller electricity companies out there, the fact that it targets Idaho and Oregon is a big plus point since populations in both areas are growing, which will naturally translate into a stronger market for the company. Additionally, IDACORP, Inc. (NYSE:IDA) also pays 60% of its earnings as dividends, which is bound to attract safe investors.
Phill Gross and Robert Atchinson's Adage Capital Management is IDACORP, Inc. (NYSE:IDA)'s largest investor. It owns 275,000 shares that are worth $31 million.
13. CenterPoint Energy, Inc. (NYSE:CNP)
Number of Hedge Fund Holders: 23
CenterPoint Energy, Inc. (NYSE:CNP) is a natural gas and electricity provider headquartered in Houston, Texas, United States. The company has more than two million metered customers and it owns substations and gas distribution pipelines.
The ongoing shift to renewable and environmentally friendly energy sources has caught Wall Street's attention and firms that are investing in these areas often see favorable institutional investor interest. On this front, CenterPoint Energy, Inc. (NYSE:CNP) is leading the fray, after it opened a green hydrogen generation project in Minnesota in June 2022, through which it aims to gain operational experience.
Insider Monkey took a look at 912 hedge fund portfolios for 2022's first quarter to find out that 23 had invested in CenterPoint Energy, Inc. (NYSE:CNP). Credit Suisse set a $34 price target for the company in May 2022, sharing that it expects CenterPoint Energy, Inc. (NYSE:CNP) to gain further in the future.
CenterPoint Energy, Inc. (NYSE:CNP)'s largest investor is Israel Englander's Millennium Management with a $66 million stake that comes through 2 million shares.
12. Sempra (NYSE:SRE)
Number of Hedge Fund Holders: 23
Sempra (NYSE:SRE) is an American holding company that targets the energy sector. Its companies provide gas and electricity to customers in Texas and California. The holding company is based in San Diego, California, United States.
Taking stock of the current hot demand for LNG, a Sempra (NYSE:SRE) subsidiary entered into a 20 year agreement in June 2022 to provide LNG to customers across North America. 23 out of the 912 hedge fund portfolios scanned by Insider Monkey for Q1 2022 had held a stake in the company.
Furthermore, Sempra (NYSE:SRE) currently commands roughly 16% of the total U.S. LNG capacity and also plans to increase its share by 900 million cubic feet by expanding one of its facilities. The increased role of American LNG companies in weaning Europe off of Russian gas will see the company become an even more important player in its industry.
Israel Englander's Millennium Management is Sempra (NYSE:SRE)'s largest investor. It owns 364,975 shares that are worth $61 million.
11. NiSource Inc. (NYSE:NI)
Number of Hedge Fund Holders: 28
NiSource Inc. (NYSE:NI) is one of the oldest American companies as it was founded even before the civil war began. The company provides electricity and natural gas to several U.S. states and its portfolio includes more than a thousand megawatts of electricity. NiSource Inc. (NYSE:NI) was founded in 1847 and is based in Merrillville, Indiana.
Credit Suisse set a $32 price target for the company in April 2022, as it shared confidence in the company's assets but worried about the execution.
A major strong point about NiSource Inc. (NYSE:NI) is the fact that it sells both electricity and natural gas. This enables the company to offset seasonal fluctuations in its cash flows. Additionally, the company has strong investments of up to $4 billion lined up for the next couple of years.
Israel Englander's Millennium Management is NiSource Inc. (NYSE:NI)'s largest investor through a $171 million stake that comes courtesy of 5.3 million shares.
10. The Southern Company (NYSE:SO)
Number of Hedge Fund Holders: 28
The Southern Company (NYSE:SO) is an electricity generator, transmitter, and distributor. Additionally, the company also operates natural gas pipelines. Its electricity generation facilities use a mixture of sources, such as fossil fuels, wind, and solar. The Southern Company (NYSE:SO) is headquartered in Atlanta, Georgia, United States.
The Southern Company (NYSE:SO) is also one of the U.S. power generators that have its eyes on the future. The company plans to move away from coal to generate electricity, and its 21 year plan starting from 2007 aims at reducing the coal plants from 66 to eight by 2028. On this front, The Southern Company (NYSE:SO) had already cut down its coal plants by more than half to 18 in 2020. It also plans to have two nuclear power generation facilities active by the end of this year.
By the end of this year's March quarter, 28 out of the 912 hedge funds part of Insider Monkey's research had held a stake in the company.
The Southern Company (NYSE:SO)'s largest investor is Jim Simons's Renaissance Technologies which owns 1.6 million shares that are worth $119 million.
9. Entergy Corporation (NYSE:ETR)
Number of Hedge Fund Holders: 29
Entergy Corporation (NYSE:ETR) is a diversified electricity company headquartered in New Orleans, Louisiana, United States. The company generates electricity through nuclear, coal, solar, gas, and hydroelectric sources.
Wells Fargo lowered Entergy Corporation (NYSE:ETR)'s price target to $125 from $140 in June 2022, due to valuation concerns, but maintained that the company has its eye on the future as evidenced by its investor day. Insider Monkey's Q1 2022 hedge fund poll revealed that 29 had held a stake in the company.
Should Entergy Corporation (NYSE:ETR)'s long term investment projects bear fruit, then the company will become one of the largest renewable power producers in the U.S. These projects have the potential to add more than 5,000 megawatts of power to the company's portfolio by the middle of this decade.
Ken Griffin's Citadel Investment Group is Entergy Corporation (NYSE:ETR)'s largest investor. It owns 1.4 million shares that are worth $166 million.
8. Eversource Energy (NYSE:ES)
Number of Hedge Fund Holders: 29
Eversource Energy (NYSE:ES) is an electricity, gas, and water distributor in the United States. It serves a large variety of customers that include residential, commercial, and first responders. The company is headquartered in Springfield, Massachusetts.
For its first quarter of 2022, Eversource Energy (NYSE:ES)'s revenue grew massively by 23% to $3.4 billion, injecting fresh optimism into the company's future. The growth followed a trend of a 6% compounded annual growth rate (CAGR) for its EPS over the last eight years, and it was aided by the company's asset base increasing in value - a key factor for utility companies.
Eversource Energy (NYSE:ES) continues to aim at expanding this rate base, by planning a massive $18 billion investment package for the years between 2022 and 2026. 29 of the 912 hedge funds scanned by Insider Monkey had invested in the company during the first quarter of this year.
Eversource Energy (NYSE:ES)'s largest investor is Stuart J. Zimmer's Zimmer Partners which owns 2.5 million shares that are worth $224 million.
7. Xcel Energy Inc. (NASDAQ:XEL)
Number of Hedge Fund Holders: 30
Xcel Energy Inc. (NASDAQ:XEL) is a utility company that is primarily involved in electricity. The firm generates and transmits electricity throughout the United States. It has more than five million electricity and gas customers in the United States and is headquartered in Minneapolis, Minnesota.
Xcel Energy Inc. (NASDAQ:XEL) is one of the most stable stocks out there when it comes to market performance. Not only has the company outperformed the S&P 500 since 2005, but it keeps up with the index during high growth periods as well, ensuring that investors are kept safe during troubling times and don't lose value during high growth periods. To add to this, the firm also pays out a dividend, but its yield is lower than the utility sector as a whole.
30 out of 912 hedge funds surveyed by Insider Monkey for their Q1 2022 investments had held the company's shares. Credit Suisse set an $80 price target for Xcel Energy Inc. (NASDAQ:XEL) shares during April 2022, sharing that it is well positioned to battle inflation and has strong management.
Greg Poole's Echo Street Capital Management is Xcel Energy Inc. (NASDAQ:XEL)'s largest investor. It owns 1.7 million shares that are worth $127 million.
6. NRG Energy, Inc. (NYSE:NRG)
Number of Hedge Fund Holders: 31
NRG Energy, Inc. (NYSE:NRG) is an American electricity company that serves several regions of the North American country. The company provides electricity and other services to a staggering six million people in the U.S. and it is based out of Houston, Texas.
BofA reduced NRG Energy, Inc. (NYSE:NRG)'s price target to $42 from $43 in June 2022, as it cited valuation changes driving the decision but explained that the company has held well in the current environment. Insider Monkey studied 912 hedge fund investments for the first quarter of this year to discover that 32 had bought the company's shares.
Two key points for NRG Energy, Inc. (NYSE:NRG) are its successful efforts to reduce leverage over the past couple of years and its plans to gradually pass on the impact of higher gas prices to consumers. Coupled with this is a strong share repurchase program that will buffer the share price as this year ends
NRG Energy, Inc. (NYSE:NRG)'s largest investor is Richard S. Pzena's Pzena Investment Management which owns 18.6 million shares that are worth $715 million.
Alongside Vistra Corp. (NYSE:VST), NextEra Energy, Inc. (NYSE:NEE), and Constellation Energy Corporation (NASDAQ:CEG), NRG Energy, Inc. (NYSE:NRG) is a good utility stock.
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Disclosure: None. 15 Best Utility Stocks To Invest In. is originally published on Insider Monkey.