We recently compiled a list of the 12 Best Utility Stocks to Buy According to Hedge Funds. In this article, we are going to take a look at where Duke Energy Corporation (NYSE:DUK) stands against the other utility stocks.
The rapid growth of artificial intelligence (AI) is putting an unprecedented strain on the power grid. One of the primary concerns is the unpredictable nature of AI demand. Unlike traditional industries, AI companies are experiencing exponential growth, making it difficult for utilities to forecast and plan for energy demand. This uncertainty is further complicated as the regulatory framework governing utilities is also a significant obstacle to addressing the energy crisis. Utilities are required to petition regulators for approval to invest in new infrastructure, which can be a time-consuming and uncertain process. This has led to a situation where utilities are unable to invest in the infrastructure needed to support the growth of AI, exacerbating the energy crisis.
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In an interview with CNBC on December 6, Nicholas Campanella, Senior Equity Research Analyst at Barclays, discussed the growing demand for power to support the increasing needs of data centers and the tech industry. Campanella forecasts that the US would face a shortage of resources to meet this demand, making nuclear power an attractive option. Campanella cited the fact that gas turbines are largely sold out between now and 2029, and limited ability to bring on new renewables between now and 2026-2027. Campanella emphasized that the growing demand for power from data centers and hyperscalers would drive up demand for nuclear energy.
Given the recent surge in their price, Campanella highlighted that investors should still buy stocks in utility and independent power-producing companies involved in nuclear power, citing the growing mismatch between supply and demand for power in the late decade. According to Campanella, utility companies that have nuclear assets are well-positioned to capitalize on this trend, particularly those with early site permits or Combined Operating Licenses. Campanella pointed out that the last nuclear renaissance had left several sites with existing permits, which could be leveraged to expedite the development of new nuclear facilities. He forecasts that additional large-scale and Small Modular Reactor (SMR) commitments will be made in 2025.
The growing energy demands driven by the rapid expansion of artificial intelligence and data centers present opportunities for investors, particularly in utility companies. With that in context, let’s take a look at the 12 best utility stocks to buy according to hedge funds.
Our Methodology
For this article, we used the Finviz and Yahoo stock screeners to find the 40 largest utility companies. We then used Insider Monkey’s Hedge Fund database to rank 10 stocks according to the largest number of hedge fund holders, as of Q3 2024. The list is sorted in ascending order of hedge fund sentiment.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Aerial view of a power plant near a lake lit up at night, showing off the company’s expansive electricity generation capabilities.
Duke Energy Corporation (NYSE:DUK)
Number of Hedge Fund Holders: 46
Duke Energy Corporation (NYSE:DUK), headquartered in Charlotte, North Carolina, is one of the largest energy holding companies in the United States. The company serves over 8.2 million customers across the Carolinas, Florida, Indiana, Ohio, and Kentucky, Duke Energy Corporation (NYSE:DUK) generates power from a diverse energy mix, including nuclear, coal, natural gas, and renewables.
Duke Energy Corporation (NYSE:DUK) is investing heavily in grid hardening and modernization. In 2023 alone, the company invested more than $4 billion in grid enhancements, including targeted undergrounding, pole upgrades, and the deployment of self-healing technology. These investments have not only improved the resilience of the grid but also helped avoid nearly 550,000 customer outages and saved 7 million hours of outage time during recent hurricanes. Looking ahead, Duke Energy Corporation (NYSE:DUK) plans to continue these critical infrastructure investments, with grid investments accounting for half of its $73 billion capital plan over the next five years.
Duke Energy Corporation (NYSE:DUK) is also driving growth through robust economic development and customer additions. The company has seen significant customer growth, adding approximately 75,000 residential customers in the Carolinas and nearly 30,000 in Florida in the first 9 months of 2024. This growth is supported by strong economic development activity, including the signing of letter agreements for 2 gigawatts of data centers.
Overall DUK ranks 7th on our list of the best utility stocks to buy according to hedge funds. While we acknowledge the potential of DUK as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than DUK but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
