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 Vistra Corp. (NYSE:VST) 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).
Solar panel workers installing a new farm for clean energy generation.
Vistra Corp. (NYSE:VST)
Number of Hedge Fund Holders: 97
Vistra Corp. (NYSE:VST) headquartered in Irving, Texas, is a leading integrated power company that operates in the electricity and natural gas markets. The company serves 5 million residential, commercial, and industrial customers in 16 states and Washington, D.C. through its retail brand TXU Energy. Vistra Corp.’s (NYSE:VST) integrated business model includes generation, commercial, and retail operations.
Vistra Corp.’s (NYSE:VST) management believes that the growing demand for data centers and the increasing need for cloud computing and artificial intelligence presents a significant opportunity for the company to grow its business. The company is taking a multi-faceted approach to capitalize on this opportunity. Vistra Corp. (NYSE:VST) is in detailed discussions with several data center developers and hyperscalers to provide power to their facilities and is exploring various structures, including co-location deals, new build projects, and portfolio approaches. The company’s Comanche Peak nuclear plant in Texas has become an attractive site for data center development due to its speed-to-market advantage and the state’s favorable business environment.
As Vistra Corp. (NYSE:VST) continues to pursue data center development opportunities, the company is also focused on ensuring that its growth is sustainable and responsible. The company’s leadership team recognizes that the growth of data centers will require significant investments in new generation and transmission infrastructure. The company is working closely with stakeholders, including policymakers, transmission and distribution utilities, and local officials, to advance these opportunities and create value for its customers and shareholders.
Overall VST ranks 1st on our list of the best utility stocks to buy according to hedge funds. While we acknowledge the potential of VST 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 VST 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.
