We recently published a list of 12 Best Infrastructure Stocks to Buy According to Hedge Funds. In this article, we are going to take a look at where Exelon Corp. (NASDAQ:EXC) stands against other best infrastructure stocks to buy according to hedge funds.
Doug Rachlin, Neuberger Berman senior portfolio manager, joined CNBC’s ‘Squawk on the Street’ on January 27 to discuss why he believes that the current opportunity set in infrastructure is the best he has seen in three decades. Managing this strategy since the summer of 1996, Rachlin pointed to several factors driving his optimism. One major aspect is the role of midstream infrastructure companies in supporting energy dominance in the US. The US leads globally in propane exports, accounting for 46% of worldwide supply.
Rachlin emphasized that these investments align with principles from investors like Charlie Munger. He advocates for concentrated investing based on strong conviction rather than spreading bets thinly across many stocks. Regarding recent developments that might impact pipeline companies involved in natural gas transmission, such as news related to deep sea activities, Rachlin noted that natural gas prices reaching $4 were due to cold winter weather rather than AI-driven data center buildouts. He highlighted growth prospects for LNG exports over the next decade, which could reach up to 35 billion cubic feet per year under favorable policies initiated during Trump’s administration.
This growth aligns well with Neuberger Berman’s focus on midstream infrastructure within their broader energy transition strategy. The firm emphasizes utilities, renewables, and Master Limited Partnerships alongside traditional energy assets like pipelines critical for transporting natural gas. This is a vital component in powering data centers across the country. As LNG exports are set to double over four years (from ~13 billion cubic feet today to potentially over 25 billion cubic feet by end-2028) and possibly reach even higher levels thereafter, the demand for robust midstream infrastructure will continue growing. This scenario underscores why Rachlin views current opportunities as compelling within his long-standing career managing this sector-focused investment strategy.
The infrastructure asset management (IAM) market is booming. It was worth $37.65 billion in 2022 and is predicted to grow by 8.9% each year until 2030. This is because companies are using these services to save money on infrastructure maintenance. Industries like manufacturing and oil and gas use IAM to optimize existing assets and ensure upkeep, especially since upgrading older designs is expensive. For example, much of the US’s energy infrastructure is 25+ years old, and Europe struggles with water waste due to leaky pipes. IAM helps maximize return on assets, improving quality and productivity.
Methodology
We first sifted through ETFs, online rankings, and internet lists to compile a list of the top infrastructure stocks to buy. We then selected the 12 stocks that were the most popular among elite hedge funds and that analysts were bullish on. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q3 2024. The hedge fund data was sourced from Insider Monkey’s database which tracks the moves of over 900 elite money managers.
Why are we interested in the stocks that hedge funds pile into? 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).
A vast array of wind turbines on a hillside, showcasing the company’s takeover of renewable energy.
Exelon Corp. (NASDAQ:EXC)
Number of Hedge Fund Holders: 34
Exelon Corp. (NASDAQ:EXC) is a utility services holding company that focuses on energy distribution and transmission across the US and Canada. It purchases and sells electricity and natural gas, and manages the transmission and distribution of these energy sources to many customers. These include residential, commercial, and industrial customers.
In FQ3 2024, the company’s earnings per share reached $0.71, which was a $0.04 increase year-over-year, driven by a $0.03 boost from higher distribution and transmission rates. This underscores the financial impact of its infrastructure investments. The company now reaffirms its 5-7% annual earnings growth target through 2027 for this reason.
The company is investing heavily in infrastructure. Delmarva Power seeks a $35.6 million revenue increase for gas upgrades. PECO wants $354 million more for electric and $78 million for gas infrastructure. ComEd’s proposed plan includes a $637 million revenue and $3.9 billion rate base increase for grid modernization. The $9.7 billion Vienna-Nelson transmission line project highlights this commitment and improves reliability, which enables coal plant retirement (saving customers around $100 million), and supports local businesses.
These investments are crucial for grid resilience, reliability, and accommodating the demand from electrification and data centers. Exelon Corp. (NASDAQ:EXC) has completed its 2024 equity issuances and plans to raise an additional $1.6 billion through 2027 to support its $34.5 billion capital plan.
Overall, EXC ranks 9th on our list of best infrastructure stocks to buy according to hedge funds. While we acknowledge the growth potential of EXC, our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than EXC but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap
Disclosure: None. This article is originally published at Insider Monkey.
