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George Fisher
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  • Utility Spectrum by Industry and Market Capitalization 0 comments
    Apr 1, 2011 12:31 AM | about stocks: EXC, PGC, PEG, SO, D, DUK, SRE, EQT, AWK, WTR, CWT, UTL, CHG, MGEE, CV, EDE, ORA, EGAS, RGCO, DGAS, ARTNA, YORW, CTWS
     
    Utility investors come in all shapes and sizes. Some gravitate to larger capitalization companies while others may gravitate to small company selections. Depending on an investor’s portfolio strategy and investment needs, creating exposure to some of both is a well-liked approach. 
     
    While utilities are usually lumped together as a sector, it is important to appreciate the specific industry in which each company operates. While as a group, utilities tend to move together due to the influence of competitive dividend yields, or lack thereof, underlying economic conditions along with political and regulatory pressures will affect utility industries differently. 
     
    For example, a rising natural gas market may increase profits at low-cost nuclear merchant power producers as rising input costs for electricity generated from natural gas may lead to a firming of auction pricing. Rising overall electric rates may negatively impact profitability at water utilities as electricity to power the distribution pumps is a large expense throughout the industry. 
     
    Within a utility portfolio, multiple selections should be made that diversify across industries and market capitalizations. While bigger is not always better, and smaller is not always smarter, a combination of these following twenty-four companies could create an interesting portfolio.
     
    The largest market capitalization utility companies and their respective market caps, in order, by industry are:
     
    Diversified Utilities  
    Exelon (EXC $27.3 bil), PG&E (PGC $17.5 bil), Public Service Enterprises (PEG $16.0 bil)
    Electric Utilities
    Southern Company (SO $32.3 bil), Dominion Resources (D $25.9 bil), Duke Energy (DUK $24.1 bil)
    Gas Utilities
    Sempra Energy (SRE $12.8 bil), EQT Corp (EQT $7.4 bil), ONEOK Inc (ONK $7.1 bil)
    Water Utilities
    American Water Works (AWK $4.9 bil), Aqua America (WTR $3.1 bil), California Water Service (CWT $775 mil)
     
    The smallest market capitalization utility companies and their respective market caps, with a trailing 12 month PE greater than 0, in order, by industry are: 
     
    Diversified Utilities
    Unitil (UTL $257 mil), CH Energy (CHG $780 mil), MGE Energy (MGEE $935 mil)
    Electric Utilities
    Central Vermont Public Service (CV $311 mil), Empire District Electric (EDE $905 mil), Ormat Technologies (ORA $1.15 bil)
    Gas Utilities
    Gas Natural (EGAS $72 mil), RGC Resources (RGCO $78 mil), Delta Natural Gas (DGAS $106 mil)
    Water Utilities
    Artesian Resources (ARTNA $150 mil), York Water (YORW $221 mil), Connecticut Water (CWTS $229 mil)
     
    This list could provide utility investors with some interesting choices. After reviewing your current selections by industry and market capitalization, adding some of these companies may dovetail into your investment profile. Further research on each as to their specific fundamentals and market valuations may provide a few new selections that meet your criterion, from either side of the spectrum.
     
    As always, investors should conduct their own due diligence, should develop their own understanding of these potential opportunities, and should determine how it may fit their current financial situation. 


    Disclosure: I am long EGAS, EXE.

    Additional disclosure: Author has been a shareholder of EGAS since 2007 and of EXC since 2011.
    Themes: Utility Stocks: EXC, PGC, PEG, SO, D, DUK, SRE, EQT, AWK, WTR, CWT, UTL, CHG, MGEE, CV, EDE, ORA, EGAS, RGCO, DGAS, ARTNA, YORW, CTWS
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