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 NextEra Energy, Inc. (NYSE:NEE) 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).
A wind turbine, its blades spinning to generate clean renewable energy.
NextEra Energy, Inc. (NYSE:NEE)
Number of Hedge Fund Holders: 69
NextEra Energy, Inc. (NYSE:NEE) headquartered in Juno Beach, Florida, is one of the world’s largest producers of wind and solar energy. The company operates through its subsidiaries, Florida Power & Light (FPL) and NextEra Energy Resources, serving over 12 million customers. NextEra Energy, Inc. (NYSE:NEE) company also provides natural gas through its subsidiary Florida City Gas (FCG) and serves about 120,000 residential and commercial customers.
NextEra Energy, Inc. (NYSE:NEE) has been actively expanding its renewable energy portfolio, adding significant capacity in wind, solar, and battery storage. In Q3, the company added approximately 3 gigawatts of new renewables and storage to its backlog, bringing the running four-quarter total to approximately 11 gigawatts. This consistent growth in development is expected to more than double the company’s combined renewable generation portfolio, growing from 38 gigawatts as of Q3 to potentially 81 gigawatts by the end of 2027.
Furthermore, NextEra Energy, Inc. (NYSE:NEE) has entered into strategic framework agreements with major customers, including two Fortune 50 companies and Entergy. These agreements, totaling up to 15 gigawatts of potential new renewables and storage projects will provide NextEra Energy, Inc. (NYSE:NEE) with the flexibility to allocate assets efficiently and align its development efforts with the specific needs of its partners.
Overall NEE ranks 3rd on our list of the best utility stocks to buy according to hedge funds. While we acknowledge the potential of NEE 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 NEE 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.
