Aristotle Capital Management, an independent/employee-owned investment management organization, published its “Aristotle Capital Management Value Equity Fund” first quarter 2022 investor letter – a copy of which can be downloaded here. For the first quarter of 2022, Aristotle Capital’s Value Equity Composite posted a total return of -7.19% gross of fees (-7.26% net of fees), underperforming the -0.74% return of the Russell 1000 Value Index and the -4.60% return of the S&P 500 Index. Try to spend some time looking at the fund’s top 5 holdings to be informed about their best picks for 2022.
In its Q1 2022 investor letter, Aristotle Capital Management Value Equity mentioned Xcel Energy Inc. (NASDAQ:XEL) and explained its insights for the company. Founded in 1909, Xcel Energy Inc. (NASDAQ:XEL) is a Minneapolis, Minnesota-based utility holding company with a $41.2 billion market capitalization. Xcel Energy Inc. (NASDAQ:XEL) delivered a 11.82% return since the beginning of the year, while its 12-month returns are up by 6.62%. The stock closed at $75.70 per share on May 25, 2022.
Here is what Aristotle Capital Management Value Equity has to say about Xcel Energy Inc. (NASDAQ:XEL) in its Q1 2022 investor letter:
“Xcel Energy owns and operates four utilities serving 3.7 million electric customers and 2.1 million natural gas customers in eight states. Headquartered in Minneapolis, Minnesota, the firm generates $11.5 billion in annual revenue and owns infrastructure that ranges from nuclear power plants to wind farms.
The company has been a leader in renewable energy development among regulated utilities. At the end of 2020, 47% of the energy Xcel produced came from carbon-free sources, making it one of the foremost wind producers and renewable energy providers in the U.S. It was also an early mover to announce (in December 2018) a 100% carbon free goal by 2050. The company plans to invest $26 billion in 2022-26, much of it going to renewable energy projects and electric grid infrastructure to support clean energy.
High-Quality Business
Some of the quality characteristics we have identified for Xcel Energy include:
-Consistent operator with a long history of rate base growth, fair customer rates, balance sheet strength, and appropriate operating and maintenance expenses;
-Presence in states with favorable regulatory environments that support the shift toward renewable energy generation, transmission and distribution; and
-Strong management team with demonstrated business acumen having at an early stage successfully positioned Xcel for the ongoing renewable energy transition.
Attractive Valuation
We believe Xcel Energy’s current stock price is offered at a discount to our determination of the company’s intrinsic value given our estimates for higher normalized earnings and dividend payments.
Compelling Catalysts
Catalysts we have identified for Xcel Energy, which we believe will cause its stock price to appreciate over our three- to five-year investment horizon, include:
-Xcel is well positioned to benefit from increased demand for clean energy, as its service territories have what we believe to be some of the best wind and solar resources in the country, and the states it serves are strong supporters of shifting from a heavy reliance on coal generation to renewables;
-Continue leading the clean energy transition by aggressively replacing its coal generated energy capacity in a cost-effective manner. Xcel has plans to develop >5GW of solar and wind, including both greenfield and repowering opportunities; and
-Capital spending to build out the electric transmission network will support the expansion of renewables in Xcel’s service territory and should result in earnings and dividend growth.”
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Our calculations show that Xcel Energy Inc. (NASDAQ:XEL) fell short and didn’t make it on our list of the 30 Most Popular Stocks Among Hedge Funds. Xcel Energy Inc. (NASDAQ:XEL) was in 30 hedge fund portfolios at the end of the first quarter of 2022, compared to 36 funds in the previous quarter. Xcel Energy Inc. (NASDAQ:XEL) delivered a 16.59% return in the past 3 months.
In August 2021, we also shared another hedge fund’s views on Xcel Energy Inc. (NASDAQ:XEL) in 10 High Sharpe Ratio Dividend Stocks in the S&P 500. You can find other investor letters from hedge funds and prominent investors on our hedge fund investor letters 2022 Q1 page.
Disclosure: None. This article is originally published at Insider Monkey.
