Five Utilities Stocks to Buy Now

While stocks from most industry sectors are still trying to recoup the losses they suffered at the start of 2016, several utility stocks are currently trading with double-digit gains this year. The outperformance of utilities can be gauged from the returns of S&P 500 Utilities sector, which is up by 12% year-to-date. In comparison the S&P 500 is trading marginally down for the year. Since utilities are on fire currently, we at Insider Monkey thought of compiling a list of the stocks from the sector based on their relative popularity among hedge funds covered by us at the end of the fourth quarter. Read further to know which are the five stocks that made it to the top of our list.

We track prominent investors and hedge funds because our research has shown that historically their stock picks delivered superior risk-adjusted returns. This is especially true in the small-cap space. The 15 most popular small-cap stocks among a select group of investors delivered a monthly alpha of 80 basis points between 1999 and 2012 (see the details here).

#5 T-Mobile US Inc (NASDAQ:TMUS)

– Investors with Long Positions (as of December 31): 50

– Aggregate Value of Investors’ Holdings (as of December 31): $2.41 billion

Let’s start with T-Mobile US Inc (NASDAQ:TMUS), which saw its ownership among hedge funds covered by us decline by four and the aggregate value of their holdings fall by $792 million during the fourth quarter. The shares of the ‘uncarrier’ had a major bull run in 2015, but have failed to continue it this year as they trade with year-to-date losses of over 7%. For its fourth quarter, the company reported EPS of $0.34 on revenue of $8.25 billion, beating analysts’ expectations of EPS of $0.15 on revenue of $8.20 billion. After refusing to join the company’s ‘Binge On’ program when it was launched three months ago, Alphabet Inc (NASDAQ:GOOGL) announced, on March 17, that its video platform YouTube and Google Play’s video content will now support the service. ‘Binge On’, which allows users to stream videos without any data charges, has been appreciated by consumers and investors, but some analysts are skeptical if the company can continue with this offer since it is going to hamper T-Mobile US Inc (NASDAQ:TMUS)’s network capacity significantly. Billionaire James Dinan‘s York Capital Management initiated a large stake in the company by purchasing over 3.26 million shares during the fourth quarter.

#4 Verizon Communications Inc. (NYSE:VZ)

– Investors with Long Positions (as of December 31): 52

– Aggregate Value of Investors’ Holdings (as of December 31): $2.45 billion

Though the number of investors covered by us with long positions in Verizon Communications Inc. (NYSE:VZ) fell  11.8% during the fourth quarter, the aggregate value of their holdings saw only a marginal decline of 2.8% during the same period. With ownership of 15 million shares of the company, Warren Buffett‘s Berkshire Hathaway continued to remain Verizon Communications.’s largest shareholder at the end of December among the funds tracked by us. Owing largely to the earnings and revenue beat for the fourth quarter, shares of Verizon Communications Inc. (NYSE:VZ) are currently trading up almost 14% year-to-date. On March 4, the company launched three separate cash tender offers to raise up to $11.6 billion in debt. Most analysts that cover Verizon Communications feel that it has very little downside risks because it trades at a trailing P/E of 12.18, much below the telecom industry’s average of 20.07 and, along with that, sports an attractive annual dividend yield of 4.24%. On March 14, analysts at Citigroup  reiterated their ‘Neutral’ rating on the stock, but upped their price target to $54 from $49.

#3 Cheniere Energy, Inc. (NYSEMKT:LNG)

– Investors with Long Positions (as of December 31): 54

– Aggregate Value of Investors’ Holdings (as of December 31): $5.83 billion

Shares of Cheniere Energy, Inc. (NYSEMKT:LNG) have tanked by over 50% in the past year, however, it remained one of the most popular utility stock among hedge funds at the end of December. The ownership of the company among funds tracked by us fell by eight and the aggregate value of their holdings in it declined by nearly $1.29 billion during the fourth quarter. Billionaire activist investor Carl Icahn‘s Icahn Capital LP increased its stake in Cheniere Energy, Inc. (NYSEMKT:LNG) by 15% during the fourth quarter to 32.68 million shares, which represented nearly 14% of all outstanding shares of the company. In December last year, Cheniere Energy’s Board fired CEO Charif Souki and replaced him with an interim CEO, which many on the Street believe was done at the behest of Mr. Icahn, who just several months earlier had got two of his nominees appointed on the company’s Board. The rebound in the broader market and oil prices in the past few weeks has helped Cheniere Energy’s stock to recover its losses as it now trades marginally down for the year. On March 4, analysts at JPMorgan Chase & Co. initiated coverage on the stock with an ‘Overweight’ rating and $54 price target.

#2 Williams Companies Inc (NYSE:WMB)

– Investors with Long Positions (as of December 31): 59

– Aggregate Value of Investors’ Holdings (as of December 31): $4.72 billion

Amid a 30% decline of Williams Companies Inc (NYSE:WMB)’s stock during the fourth quarter, the number of funds invested in the stock slid by 14 and the aggregate value of their holdings in it saw a drop of $1.32 billion. Richard Perry‘s Perry Capital was among the hedge funds that reduced their stakes in the company during the fourth quarter; it cut its holding by 4% to 8.06 million shares. The shares of Williams Companies Inc (NYSE:WMB) have again fallen heavily this year, largely due to the concerns about its impending merger with Energy Transfer Equity LP (NYSE:ETE). Though they have recovered by 13% since the company reiterated its commitment towards the merger, on March 14, they are still trading down by over 25% year-to-date. The 11 prominent analysts and research houses that track the stock currently have an average ‘Overweight’ rating and an average price target of $31.44, which represents a potential upside of 73.2% from the stock’s current trading price.

#1 Kinder Morgan Inc (NYSE:KMI)

– Investors with Long Positions (as of December 31): 67

– Aggregate Value of Investors’ Holdings (as of December 31): $2.31 billion

Like all the other stock mentioned in this list Kinder Morgan Inc (NYSE:KMI) also saw a decline in popularity as the number of funds bullish on the among the investors we track declined by five during the fourth quarter. However, it’s the only stock in this list that saw the aggregate value of their holdings increase by $486 million during the same period. Interestingly, the growth of the total value of hedge funds’ holdings took place amid a 46% slump witnessed by the stock. While Kinder Morgan Inc (NYSE:KMI)’s stock has appreciated by 28.8% so far this year, analysts remain skeptical if it could hold on to these gains. The main reason for their skepticism is that the gains have come on the back of a rally in oil prices. They feel if the normal forces of demand and supply are left untouched, oil will again head lower and Kinder Morgan could start declining. On March 17, analysts at Credit Suisse downgraded the stock to ‘Neutral’ from ‘Outperform’, but upped their price target to $22 from $20. Berkshire Hathaway initiated a large stake in Kinder Morgan during the fourth quarter by purchasing 26.53 million shares, thereby becoming its largest shareholder at the end of December among the funds in our database.

Disclosure: None