Investors wanting some stability in an constantly volatile market can always find safe havens in stocks that can withstand even the worst of times. One has to consider no matter how bad things may get in the economy, homes will always need cooling, heating, water and of course the lights have to stay on - I call these "non-negotiables." When things get bad, we can negotiate on whether or not we are going to eat out tonight. I will settle for a frozen dinner, so long as I don't have to freeze in the house. This is where the utilities sector comes in to play and offer some "home/portfolio comfort."
The sector could be what investors need in this or any market. It offers plenty of earnings and dividends for any type of investor willing to settle for some of the less sexy names on the market - but without all of the risks. What's interesting here is that this sector has not performed as well as some of the others early on in the year. So it is hard to say with any degree of certainty whether or not this is a good sign, bad sign or merely "table-setting" for what lies ahead. However, despite the sector's lagging performance, there are several stocks that have posted significant gains early on in the year and a few that are on the verge of climbing higher and might be worth considering. Here are my four buys and two sells within the sector.
CenterPoint Energy (CNP) has seen better days. It appears that the stock has not seen any green arrows at any point during the year though the broader market has produced nothing but gains. There is reason to suspect that this trend may change as the stock has climbed 4% since reaching a recent low of $18.07 at the end of January. While posting solid earnings relative to its peers, the stock also offers a handsome dividend at 4.3% yield.
FirstEnergy Corporation (FE) also deserves some consideration. Aside from the fact that it has traded relatively flat for the past several months, it offers an excellent dividend at 5.1% yield. With a P/E of 17 it might be considered relatively expensive, however, the stock is right at its 50-day moving average and has shown to be pretty resilient of late. Relative to its peers, its underlying fundamentals present a great opportunity for value investors willing to be patient.
Inergy, L.P. (NRGY) is one stock in this sector that didn't even benefit from the strength this sector had last year. It has been steadily grinding lower since topping out early in 2011 and it has been following a steady pattern of establishing a resistance level before ultimately breaking down. After holding near $24 for two months, it is now starting to set new lows, again continuing the trend.
Public Service Enterprise Group (PEG) is another utility experiencing similar movement as those mentioned above. The company recently fell under some important points of resistance at $31 after having traded flat for a considerable amount of time. But its stock has been slowly building a base that suggests that the stock may begin to move upward. As with the other firms above, PEG pays a respectable dividend of 4.5% and trades at a decent P/E of 10. The stock does present some value at $30, but investors should be patient and realize that it may take the rest of the year for it to regain its previous high of $35.
In the water utilities there are names such as Connecticut Water Service (CTWS) that has gained 15% on the year thus far. It pays a decent dividend at 3%, which makes it pretty safe. However, it will likely be weighed down if the entire sector makes a turn for the worse. The stock currently trades at $31.21 and is only 5% away from its 52-week high. Now may be a time to lock in some gains.
Another name that I have been looking at within gas is Clean Energy Fuels Corp. (CLNE) - for similar reasons to Connecticut Water. The stock has surged on the year with a gain of 30% and it is at the cusp of its 52-week high. The balance sheet on this company is not great, but it is improving. According to its website: The leading provider of natural gas fuel for transportation in North America, Clean Energy is the smart decision for vehicle fleets demanding the most reliable connection to CNG and LNG. With an integrated offering of best-in-market services, we have the flexibility to adapt to your specific fueling needs - from constructing, equipping and maintaining fueling stations to converting vehicles to securing the financing. There is indeed quite a bit to like here. But for similar reasons as Connecticut Water, it might be time to take some profits.