5 High Growth Utility Stocks to Buy

In this article, we discuss 5 high growth utility stocks to buy. If you want to see more stocks in this selection, check out 11 High Growth Utility Stocks to Buy. 

5. Atmos Energy Corporation (NYSE:ATO)

Number of Hedge Fund Holders: 23

Quarterly Revenue Growth YoY as of December 30, 2022: 46.50%

Atmos Energy Corporation (NYSE:ATO) is a Texas-based company engaged in the regulated natural gas distribution, pipeline, and storage businesses in the United States. On February 7, Atmos Energy Corporation (NYSE:ATO) declared a quarterly dividend of $0.74 per share, in line with previous. The dividend is distributable on March 6, to shareholders of record on February 20. Revenue in the fourth quarter of 2022 climbed 46.5% year-over-year to $1.48 billion, beating market estimates by $340 million. It is one of the best high growth utility stocks to invest in. 

On February 9, Mizuho analyst Gabriel Moreen increased Atmos Energy Corporation (NYSE:ATO)’s price target to $137 from $128 and maintained a Buy rating on the shares. The analyst noted that the company appears to be more insulated from the challenges that many utilities face.

According to Insider Monkey’s Q3 data, 23 hedge funds were long Atmos Energy Corporation (NYSE:ATO), compared to 21 funds in the last quarter. Ken Griffin’s Citadel Investment Group is the leading stakeholder of the company, with 815,901 shares worth $83 million. 

Here is what Aristotle Capital Management Value Equity has to say about Atmos Energy Corporation (NYSE:ATO) in its Q1 2022 investor letter: 

“Headquartered in Dallas, Atmos Energy is the largest fully regulated natural gas-only utility in the U.S. It serves over three million distribution customers across eight states, primarily in the South. Approximately 70% of its revenue comes from Texas, where it owns one of the largest natural gas pipeline systems in the state.

High-Quality Business

Some of the quality characteristics we have identified for Atmos Energy include:

-Strong balance sheet and financial strength, perhaps most visible during 2021’s winter storm Uri when millions of Texans lost power. The significant spikes in natural gas prices stressed distributors, but Atmos handled over $2 billion of incremental costs with little long-term impact;

-Experienced and shareholder-friendly management team, as demonstrated by 38 consecutive years of dividend increases; and

-Attractive demographics and favorable regulatory environments in the states where it operates.

Attractive Valuation

Given our estimates of higher normalized earnings and dividend payments, we believe shares of Atmos Energy are trading at a discount relative to our estimate of their intrinsic value.

Compelling Catalysts

Catalysts we have identified for Atmos Energy, which we believe will cause its stock price to appreciate over our three- to five-year investment horizon, include:

-Old pipes and aging infrastructure, coupled with a growing population, have created a large backlog of safety and maintenance projects – completion of which should drive earnings growth and steady dividend increases. Updates should both increase reliability as well as the value of Atmos Energy’s assets, enhancing profit levels permitted by regulators;

-Well positioned to source low-cost natural gas from prolific basins in Texas to its distribution network, helping to keep customer prices down and economically favorable relative to other sources of energy; and

-Advantageous regulatory environment should continue to support rate adjustments so that revenues are earned on capital projects within six to 12 months.”

4. OGE Energy Corp. (NYSE:OGE)

Number of Hedge Fund Holders: 16

Quarterly Revenue Growth YoY as of September 29, 2022: 47.00%

OGE Energy Corp. (NYSE:OGE) is an Oklahoma-based company that generates, transmits, distributes, and sells electric energy. The company also provides natural gas, crude oil, and natural gas liquids in the United States. OGE Energy Corp. (NYSE:OGE) is one of the top high growth stocks in the utility sector. The year-over-year quarterly revenue growth as of September 29 came in at 47%. 

On January 23, Guggenheim analyst Shahriar Pourreza downgraded OGE Energy Corp. (NYSE:OGE) to Neutral from Buy with a price target of $40, up from $39.

According to Insider Monkey’s third quarter database, 16 hedge funds were bullish on OGE Energy Corp. (NYSE:OGE), compared to 13 funds in the last quarter. Stuart J. Zimmer’s Zimmer Partners is the largest stakeholder of the company, with 2.18 million shares worth nearly $80 million. 

3. Vistra Corp. (NYSE:VST)

Number of Hedge Fund Holders: 46

Quarterly Revenue Growth YoY as of September 29, 2022: 72.00%

Vistra Corp. (NYSE:VST) is a Texas-based integrated retail electricity and power generation company. The company operates through six segments – Retail, Texas, East, West, Sunset, and Asset Closure. It is one of the top high growth utility stocks to consider. The Q3 2022 revenue of $5.15 billion climbed 72.2% on a year-over-year basis, while the net income came in at $678 million. 

According to Insider Monkey’s data, 46 hedge funds were bullish on Vistra Corp. (NYSE:VST) at the end of September 2022, compared to 42 funds in the prior quarter. Howard Marks’ Oaktree Capital Management is the leading stakeholder of the company, with 25.4 million shares worth $533.4 million. 

Legacy Ridge Capital made the following comment about Vistra Corp. (NYSE:VST) in its Q4 2022 investor letter:

“I sent the 2019 letter on February 10, 2020. Vistra Corp. (NYSE:VST) closed that day at $22.27. As I write in early January the price is $22.30. Now I did say “We would actually prefer it if both (VST & NRG) securities went nowhere for as long possible”—assuming repurchased shares at depressed valuations was our best-case scenario. But A) I didn’t think I’d be that right with respect to “nowhere”, and B) I certainly didn’t think I’d be right 3-years on. Here we are though, with the stock literally going nowhere for the last 3-years. Just like we drew it up!

“Management has indeed repurchased 20.3% of the shares outstanding since year-end 2019 and will probably repurchase another 12-15% of the outstanding shares in 2023. My initial assumption was that management could plausibly repurchase 60% of their shares by 2030, leaving them with 200mn outstanding (that assumed shares were appreciating and they had to pay more as the years went on, not what’s transpired so far), but at the current pace of about 50mn shares repurchased per year, they’ll hit that mark by the end of 2026, which would imply free cash flow of $10 pershare if the underlying business continues to perform as it currently is. That’s a 45% FCF yield on today’s price. Meanwhile, dividends per share have grown 54% since 2019 and the stock now yields 3.5%, growing about 15% a year.

Being paid to wait makes waiting much easier. We had sold VST shares in mid-2020, replacing some of the position with call options, to free up capital for other opportunities that became available. But when winter storm Uri hit Texas in February 2021 and VST shares went down 20%+, below $17 a share, we rebuilt our common equity position. Today VST oscillates between the biggest and second biggest position in the fund, depending on weekly performance.”

2. New Fortress Energy Inc. (NASDAQ:NFE)

Number of Hedge Fund Holders: 33

Quarterly Revenue Growth YoY as of December 30, 2022: 140.20%

New Fortress Energy Inc. (NASDAQ:NFE) is a New York-based integrated gas-to-power infrastructure company that provides energy and development services worldwide. On January 25, New Fortress Energy Inc. (NASDAQ:NFE) announced that its unit Genera has been chosen for a 10-year operation and maintenance agreement with the Puerto Rico Electric Power Authority. Under the agreement, Genera will undertake the operation, maintenance, decommissioning, and modernization of PREPA’s thermal power generation system, which has a capacity of around 3,600 MW. This will occur after a mobilization period. New Fortress Energy Inc. (NASDAQ:NFE) is one of the premier high growth stocks to invest in. 

On February 10, Barclays analyst Marc Solecitto lowered New Fortress Energy Inc. (NASDAQ:NFE)’s price target to $44 from $53 and maintained an Equal Weight rating on the shares. According to the analyst, the stock’s valuation appears to be close to fair on a risk-adjusted basis at this time. However, he noted that there could be compelling upside for the shares if the company executes on its long-term strategy.

According to Insider Monkey’s third quarter database, 33 hedge funds were long New Fortress Energy Inc. (NASDAQ:NFE), compared to 21 funds in the prior quarter. Michael Novogratz’s Fortress Investment Group is the leading stakeholder of the company, with 13.4 million shares worth $585.6 million. 

1. Excelerate Energy, Inc. (NYSE:EE)

Number of Hedge Fund Holders: 12

Quarterly Revenue Growth YoY as of September 29, 2022: 318.10%

Excelerate Energy, Inc. (NYSE:EE) is a Texas-based company that provides flexible liquefied natural gas solutions worldwide. In Q3 2022, Excelerate Energy, Inc. (NYSE:EE)’s revenue of $803.3 million climbed 318.2% year-over-year, beating Wall Street estimates by $311.17 million. It is one of the best high growth utility stocks to invest in. 

According to Insider Monkey’s third quarter database, 12 hedge funds were long Excelerate Energy, Inc. (NYSE:EE), compared to 18 funds in the prior quarter. The combined stakes in Q3 amounted to $79.5 million, compared to $101.6 million in Q2. 

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