The utility sector has been performing well, and its shares offer the stability close to that of bonds without the paltry returns. In a recent article for the TheStreet.com, John Reese, CEO of Validea discusses how stable revenue streams, constant demand, consistent dividends and the regulated nature of the industry make these stocks attractive investment candidates. Even though increased demand has driven up the valuations of the group, utilities may be able to sustain their relative values given the overall demand for shares. Still, given the stretched valuations, consideration of underlying fundamentals is key.
Here are five utility stocks that present attractive opportunities:
Ormat Technologies, Inc. (ORA)—a geothermal and recovered energy power business. Considered a fairly priced “Fast Grower” under our Lynch model, and shows well under Validea’s Momentum model due to increasingly strong stock performance.
Dynegy Inc. (DYN)—produces and sells electric energy. Scores 90% under our Piotroski screen based on its strong book-market ratio and solid fundamentals. Validea’s Graham model gives this company a thumbs up for cash flow and moderate PE.
Companhia Paraneanse de Energia (ADR) (ELP)—generates, transmits and distributes electricity and provides telecommunication services in Brazil. Robust yield and favorable PE ratio satisfy the Lynch strategy, and our Neff screen likes the stock’s strong total return characteristics.
Huaneng Power International Inc. (ADR) (HNP)—independent power producer operating in China and Singapore. The deep value Dreman investment screen favors this company’s size and positive earnings trend. Price-based valuation ratios at the low end of the market and high return-on-equity add interest.
CLP Holdings Limited (ADR) (CLPY)—generator and supplier of electricity in Asia and Australia. Validea’s Lynch model considers this company a “True Stalwart” based on moderate earnings growth.