Utilities Sector seems boring
Utilities sector seems to be a boring sector. This is evident from average weighted alpha (an indicator of stock price changes) for the sector which ranges from 29.31 for the gas utilities to 60.01 for the telephone utilities compared to the weighted alpha range of 354.23 to -75.35 for all industry sectors.
The sector may seem relatively boring but once you dig deeper you can see the dynamic play of several factors. It is for us to pick the dynamic seven that give handsome returns in the next three months to one year period.
Not so boring
The utility sector stocks listed on all the three stock exchanges (AMEX, NASDAQ, and NYSE.) show lot of variations on several characteristics such as market capitalization (ranging from $6.55 million to $32.82 billion), P/E ratio (0.28 to 153), dividend yield (0% to 11.73%), and 52 week price change (-69.16% to 444%).
Based on last price (October 20) Telefonica S.A. (NYSE:TEF) is the stock with the largest market cap ($132.76 billion). Incidentally, Level 3 Communications, Inc. (NASDAQ:LVLT), the stock with the smallest market capitalization, is also from telecom sector. Georgia Power Company (GPW) and Pinnacle West Capital Corporation (PNW) are the companies whose shares are trading at lowest and highest P/E multiples. While Copano Energy, LLC (CPNO) is the company currently giving highest dividend yield, nine companies (Covanta Holding Corporation, NRG Energy, Inc., EDENOR SA (ADR), Mirant Corporation, El Paso Electric Company,
The AES Corporation, China Natural Gas, Inc., A-Power Energy Generation Systems, Ltd., and Companhia de Saneamento Basico (ADR)) are companies giving the lowest dividend yield of 0%. A-Power Energy Generation Systems, Ltd. (APWR, 127.32%), and Cascal NV (HOO, -30.19%) are the companies with highest and lowest 52 week price change percentage.
Utilities story is a long term play – so fundamentals are important
Our stock universe consists of 175 stocks in electric power (78), gas distribution (23), telephone (59 stocks), and water supply (15). We will pick our seven bull stocks based on operating metrics, financial ratios, and stock metrics. Initially we will pick seven best stocks on each of the three selection criteria (operating metrics, financial ratios, and stock metrics). Then we will pick our seven bull stocks from the 21 short listed stocks.
