We recently compiled a list of the 12 Best High Volume Stocks to Buy According to Analysts. In this article, we are going to take a look at where PG&E Corporation (NYSE:PCG) stands against the other high volume stocks.
Understanding trading volume is crucial for investors as it reveals the number of shares exchanged in a given period, which signals market interest and momentum. Stocks are classified as high or low volume based on this activity. High-volume stocks are the ones that are typically trading 500,000+ shares daily, and offer benefits like minimized volatility and tighter spreads, although they may involve speculative plays. Conversely, low-volume stocks present potential opportunities for value investors, though they carry higher volatility and liquidity risks. Analyzing volume helps identify market trends, confirm breakouts, and inform buy and/or sell decisions, especially for short-term trading strategies. However, it’s essential to consider volume alongside other factors for a comprehensive investment approach.
On February 20, Drew Matus, Chief Market Strategist at MetLife Investment Management, appeared on CNBC to discuss stock rotations and their implications for the market. When asked about the lack of upward revisions from the MAG7, Matus emphasized that it would be healthy for the market to see a rotation where the other 493 stocks in the S&P 500 begin to contribute more significantly. He explained that high concentration in equities tends to create instability, and a broader participation in growth would signal a healthier economic environment. The discussion then highlighted the evidence of this rotation, as the S&P Equal Weight index is up about 4.25% year-to-date, closely matching the 4.5% gain of the market-cap-weighted index. Matus acknowledged this trend and its importance, noting that slightly higher inflation has been manageable for companies able to pass along costs. He also pointed out that growth numbers remain strong and optimism persists, particularly among small business owners.
Methodology
We first used stock screeners to compile a list of stocks with high average 3-month volumes. We then selected 12 stocks that had a high average upside potential of over 25% and were the most popular among elite hedge funds. The stocks are ranked in ascending order of their average upside potential. We’ve also added the hedge fund sentiment for each stock, as of Q4 2024, which was sourced from Insider Monkey’s database.
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 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
Brightly-lit nighttime view of an electricity power grid with distribution lines and transmission substations.
PG&E Corporation (NYSE:PCG)
Number of Hedge Fund Holders: 74
Average Volume (3-Month): 23.673 million
Upside Potential as of February 19: 39.86%
PG&E Corporation (NYSE:PCG) is an energy provider that delivers electricity and natural gas to a vast customer base across northern and central California. Utilizing a diverse energy portfolio, which includes nuclear, hydroelectric, and renewable sources, it maintains a complex infrastructure of transmission and distribution systems to power homes, businesses, and critical infrastructure.
Citi analysts, on February 11, looked at the company’s potential to power data centers. They think it could provide 5 GW of power: 3.4 GW by 2029, which is already in planning, and another 1.5 GW between 2030 and 2040. However, wildfires, tricky pricing rules, local resistance, and power reliability problems might prevent this. If California builds fewer data centers, then the companies with existing data centers would likely make more money. Citi still maintains a Buy rating on PG&E with a $21 target.
The company has 5.5 gigawatts of potential data center load in its application pipeline. This “beneficial load” is expected to increase revenue and lower customer bills. Of the 5.5 gigawatts, 1.4 gigawatts have passed preliminary engineering studies, meaning these projects are advancing. These 1.4 gigawatts represent 15 customers across 27 sites and are expected to be online by 2030, with some coming as early as 2026.
PG&E Corporation (NYSE:PCG) is working to streamline the process for these large customers, proposing upfront funding through filings like Electric Rule 30. It estimates that every 1,000 megawatts of data center load could lead to a 1-2% reduction in customer electricity bills, making this load growth beneficial for both the company and its customers.
Third Point Management highlighted PG&E Corp.’s (NYSE:PCG) strong legal protections and wildfire mitigation efforts under AB1054, providing a cautiously positive outlook despite wildfire risks. It stated the following in its Q4 2024 investor letter:
“We are devastated by the recent events in Southern California. Several of our family members and team members call Los Angeles home, and our hearts are with all impacted by the fires.
While PG&E Corporation (NYSE:PCG) does not operate in this region, there is press speculation that one of the fires, Eaton, may have been related to transmission equipment owned by SoCal Edison (SCE), another investor-owned utility (parent company Edison International.) Edison has stated publicly that they do not believe their equipment was involved. The investigation is ongoing, and we believe it is premature to make conclusions about the origin of the fire…
If the Eaton fire ignition was related to SCE equipment, the California legal standard of “inverse condemnation” exposes SCE to resultant property damage liabilities. After PG&E’s bankruptcy in 2019, California passed a bill called AB1054 which protects the state’s investor-owned utilities (Edison, PG&E and Sempra) from these liabilities as long as they adhere to a rigorous safety standard. This includes a comprehensive wildfire mitigation plan approved annually by the government and a commitment to spend billions to harden the grid; for example, PG&E is spending a whopping $18 billion on wildfire mitigation from 2023 -2025. In exchange, AB1054 includes several protections, such as a legal prudency standard that entitles the utility to cost recovery via multiple avenues in the event of a catastrophic fire and a $21 billion insurance fund to cover incurred liabilities. SCE has an active safety certificate and thus should benefit from the protections under AB 1054, just as PG&E would in case of a future fire. Regulator-approved cost recovery is a routine proceeding for utilities in areas prone to severe climate events (hurricanes, tornadoes, earthquakes, etc.) in acknowledgement of the fact that it is not feasible to remove all risk from overhead grid infrastructure. PCG has been the preeminent advocate in California for undergrounding, which we believe is the only way to permanently eliminate wildfire risk from grid assets…” (Click here to read the full text)
Overall PCG ranks 8th on our list of the best high volume stocks to buy according to analysts. While we acknowledge the potential of PCG as an investment, 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 PCG 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.