Five Utility Stocks to Keep on Your Radar Screen
At the right price, these firms would be solid investments.
Utility stocks have been on an impressive run over the past three years--the sector is up 23%, second only to energy. At Morningstar, we're sticklers for valuation; we think that the price investors pay for a stock is one of the most critical factors in making a sound long-term investment. This is especially relevant in utilities, where investors often bid up prices in their desire for high-yielding assets.
Because we're looking for stocks priced at a comfortable discount to our fair value estimate, utility stocks' outstanding performance has left us with few compelling investment ideas today. As of Aug. 4, the average price/fair value ratio for the 70-plus utility stocks that we cover sat at a discouraging 1.12. Highlighting this overvaluation, none of these stocks currently holds a 5-star Morningstar Rating for stocks. And just two are currently rated 4 stars: Huaneng Power International (HNP) and United Utilities (UU).
Elizabeth Collins does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.