In this article, we will take a look at the 5 most undervalued utility stocks to buy according to hedge funds. To read our analysis of the recent technology trends, and market activity, you can go to the 11 Most Undervalued Utility Stocks to Buy According to Hedge Funds.
5. Hawaiian Electric Industries, Inc. (NYSE:HE)
Latest P/E Ratio: 6.72
Number of Hedge Fund Holders: 23
Hawaiian Electric Industries, Inc. (NYSE:HE) is a Honolulu, Hawaii-based holding company which comprises Hawaiian Electric – supplies power to approximately 95% of Hawaii’s population, American Savings Bank – one of Hawaii’s largest financial institutions, and Pacific Current – an investment platform to focus on sustainability projects in Hawaii.
On November 9, Hawaiian Electric Industries, Inc. (NYSE:HE) released the financial results for Q3 2023. Its net revenues declined by 13% y-o-y to $902 million, while it reported a net income of $42 million translating into a normalized EPS of $0.56, $0.02 above the consensus. It has paid regular dividends since 1901 and currently pays a quarterly dividend of $0.36 per share.
As of Q3 2023, 23 of the 910 hedge funds tracked by Insider Monkey owned shares of Hawaiian Electric Industries, Inc. (NYSE:HE), valued at $152 million. Its largest shareholder was Cliff Asness’ AQR Capital Management with ownership of 6.1 million shares valued at $75 million.
4. Black Hills Corporation (NYSE:BKH)
Latest P/E Ratio: 13.3
Number of Hedge Fund Holders: 24
Black Hills Corporation (NYSE:BKH) is a utility company based in Rapid City, South Dakota. It serves 1.3 million natural gas and electric utility customers in eight states: Arkansas, Colorado, Iowa, Kansas, Montana, Nebraska, South Dakota, and Wyoming.
As of November 1, Black Hills Corporation (NYSE:BKH) released the financial results for Q3 2023. Its revenues declined by 12% y-o-y to $407 million, while its net income surged by 30% y-o-y to $45 million. The normalized EPS was recorded at $0.67 for the quarter, which exceeded consensus estimates by $0.16.
Similar to other utility companies on our list, Black Hills Corporation (NYSE:BKH) also pays regular dividends. In October, its board of directors declared a quarterly dividend of $0.625 per share. Its shares had a dividend yield of 4.90%, as of November 22.
According to the Insider Monkey data on 910 leading hedge funds, 24 hedge funds were long Black Hills Corporation (NYSE:BKH) shares as of Q3 2023, with the total shares held by hedge funds valued at $193 million. Stuart J. Zimmer’s Zimmer Partners was the largest hedge fund shareholder with ownership of 1.3 million shares valued at $64 million.
3. Consolidated Edison, Inc. (NYSE:ED)
Latest P/E Ratio: 13.37
Number of Hedge Fund Holders: 27
Based in New York, Consolidated Edison, Inc. (NYSE:ED) is a leading energy-delivery company providing a wide range of energy-related products and services to its customers. Its primary businesses include a regulated electric, gas, and steam services provider focused on New York City and Westchester County; electric service and gas provider focused on southeastern New York and northern New Jersey; and an electric and natural gas transmission projects investor.
On November 2, Consolidated Edison, Inc. (NYSE:ED) released its financial results for Q3 2023. Its revenue declined by 7% y-o-y to $3.9 billion, while net income declined by 14% y-o-y to $526 million. It generated a normalized EPS of $1.62 for the quarter, which exceeded the consensus estimates by $0.03.
On March 1, Consolidated Edison, Inc. (NYSE:ED) announced the completion of sale of its Clean Energy Businesses to RWE Renewables Americas, LLC in a transaction valued at $6.8 billion.
Like other stocks such as Vistra Corp. (NYSE:VST), Entergy Corporation (NYSE:ETR), and Public Service Enterprise Group Incorporated (NYSE:PEG), the shares of Consolidated Edison, Inc. (NYSE:ED) are among the most undervalued utility stocks to buy according to hedge funds.
2. Entergy Corporation (NYSE:ETR)
Latest P/E Ratio: 14.58
Number of Hedge Fund Holders: 33
New Orleans, Louisiana-based Entergy Corporation (NYSE:ETR) is a utility company that provides electricity and gas services to 3 million utility customers in Arkansas, Louisiana, Mississippi, and Texas. It owns or operates more than 24,000 megawatts of generating capacity.
On October 30, Entergy Corporation (NYSE:ETR) announced an agreement to sell its gas distribution business to Bernhard Capital Partners for $484 million in cash. Proceeds from the transaction will be used to repay the Company’s debt and to support its capital needs in electric utility business.
A few days prior to this, the Board of Directors of Entergy Corporation (NYSE:ETR) had declared a quarterly dividend payment of $1.13 per share, $0.06 more than the previous amount. Its shares currently have a dividend yield of 4.28% based on the share price on November 22.
As of Q3 2023, 33 of the 910 hedge funds tracked by Insider Monkey were long Entergy Corporation (NYSE:ETR) and held shares worth $748 million. Israel Englander’s Millennium Management was the largest shareholder with ownership of 1.3 million shares valued at $119 million.
1. Vistra Corp. (NYSE:VST)
Latest P/E Ratio: 10.24
Number of Hedge Fund Holders: 52
Irving, Texas-based Vistra Corp. (NYSE:VST) is a leading integrated retail electricity and power generation company with operations in 20 states and the District of Columbia.
On March 6, Vistra Corp. (NYSE:VST) announced a definitive agreement to acquire Energy Harbor Corp in a cash and share transaction which includes a cash consideration of $3 billion and a 15% stake in a new company comprising of Energy Harbor assets and all of Vistra’s assets other than the company’s gas and coal generation fleet. The transaction is expected to close in Q4 2023.
Vistra Corp. (NYSE:VST) has been on a significant capital allocation program announced in Q4 2021. Since the launch of the program, the company has repurchased nearly 26% of its shares and has collectively returned $3.8 billion to its shareholders during the period.
As of Q3 2023, Vistra Corp. (NYSE:VST) was the most sought-after stock among hedge funds on our list of 11 most undervalued utility stocks to buy according to hedge funds, as 52 of the elite hedge funds tracked by Insider Monkey held its shares, valued at $1.3 billion. Howard Marks’ Oaktree Capital Management was its largest hedge fund shareholder with ownership of 9.0 million shares valued at $299 million.
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