We recently compiled a list of the 10 Best American Energy Stocks To Buy According to Hedge Funds. In this article, we are going to take a look at where Quanta Services Inc. (NYSE:PWR) stands against the other American energy stocks.

The energy industry includes stocks that are involved in the production or supply of energy. Companies engaged in oil and gas drilling, refining, and discovering and developing oil or gas reserves are all part of the energy sector or industry. The energy industry also comprises integrated power utility companies that use renewable energy and coal.

Energy companies continue to suffer challenges as oil supply exceeds demand. Oil prices have been below $70/barrel since early September. According to U.S. Bank Asset Management’s senior investment strategy director, Rob Haworth:

“The oil market is one that remains well supplied but isn’t well demanded.” Although the U.S. economy is strong, other major oil users like China and Germany are experiencing economic challenges. As a result, global demand is lagging.”

Nonetheless, a number of energy companies have made encouraging achievements in 2024, and investors have reaped financial rewards as the energy sector of the broader market has grown by 12.74% since the start of the year. Based on exceptional results in 2021 and 2022, it has increased by 19.89% in just three years and by 10.61% growth over the previous five years.

However, according to RSM’s Energy Outlook 2024 report, the North American energy sector will confront significant potential problems due to a global move toward renewable energy sources, aging infrastructure, and rising electricity consumption. Infrastructure limitations continue to be a major obstacle. Scalability concerns have been brought to light by record U.S. oil and natural gas output as well as a boom in renewable energy, affecting projects like solar farms in California and drilling in Texas. These challenges show how urgently infrastructure modernization investments are needed.

As per the aforementioned report, North America’s demand for electricity has increased to levels not seen in many years. Emerging technologies like green hydrogen, the use of electric vehicles, and growing data centers are important drivers. The use of machine learning and other analytical AI technology is growing among energy companies. This change alters the energy sector and aligns with tax incentives and the company’s environmental, social, and governance goals. Most importantly, integrating clean energy is essential as companies adjust to meet rising demand sustainably.

According to BloombergNEF, $303 billion was spent on U.S. renewable energy in 2023, a 22% increase from the year before, showing the continued pace of the energy transformation. Globally, $1.77 trillion was invested, signifying a strong push toward decarbonization. Even though renewable energy requires more cash, companies of all sizes—from startups to established oil and gas companies—are shifting their focus to renewables as the case for clean energy grows. This change sets up the energy industry for a significant and sustainable future.

Methodology:

We sifted through holdings of Energy ETFs and online rankings to form an initial list of 20 American Energy stocks. Then we selected the 10 stocks that were the most popular among institutional investors. The stocks are ranked in ascending order based on the number of hedge funds that have stakes in them, as per Insider Monkey’s database of Q3 2024. We have used the stock’s market cap as of November 21, 2024, as a tie-breaker in case two or more stocks have the same number of hedge funds invested.

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)

Quanta Services Inc. (NYSE:PWR)

Number of Hedge Fund Holders: 58

Leading specialist contracting firm Quanta Services, Inc. (NYSE:PWR) offers complete infrastructure solutions for the pipeline, energy, communications, and gas and electric utility markets in the US, Canada, and Australia. Quanta divides its results into three reportable segments: electric power, renewables infrastructure, and underground utility and infrastructure.

Quanta Services, Inc. (NYSE:PWR) is a top specialist contractor serving clients in the telecom, oil and gas, utility, and renewable energy markets. Its strategy goal is to position itself to benefit from secular growth trends, such as renewable energy deployment and electric grid investment, that raise demand for contractual services. In the past, the business has employed acquisitions to support organic growth in order to fulfill its objectives.

In Q3 of 2024, Quanta Services, Inc. (NYSE:PWR)’s revenue grew by 16% YoY to $6.5 billion. The rise in revenue was primarily driven by strategic acquisitions, the successful integration of acquired firms, and the high demand for the company’s services. The cash flow from operations increased by 82% to $739.91 million, while the cash flow increased by 93% YoY. Moreover, the acquisition of Cupertino Electric, which added electrical infrastructure solutions in the technology and renewable energy sectors, was one of the most significant moves for Quanta Services in Q3 2024.

The price target for Quanta Services, Inc. (NYSE:PWR) was increased by DA Davidson from $260 to $295 on November 4, 2024. In a research note, the analyst informs investors that the firm’s 2025 projections have improved since it believes the company should keep taking advantage of the current tailwinds in power generation development, electrical delivery, and complex facility buildout, even though it also sees these opportunities being fairly represented in estimates.

William Harnisch’s Peconic Partners LLC was the largest stakeholder in the company among the funds in Insider Monkey’s database. It owns 5,498,565 shares worth $1.64 billion as of Q3.

Overall PWR ranks 6th on our list of the best American energy stocks to buy. While we acknowledge the potential for PWR as an investment, our conviction lies in the belief that some 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 PWR 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.