What Does Four More Years Mean for Big Energy and Utilities?

Since President Obama won the popular vote on November 6, the utilities sector has declined over 2.9% and energy has dropped 4.6%. And that’s because with another four years under President Obama, these sectors are going to have to make some historic changes.

Under the Obama Administration, the Environmental Protection Agency (EPA) has pushed for lower carbon pollution standards for new power plants. And utilities have responded by phasing out their coal powered plants in favor of natural gas and biomass powered plants. With further regulations to curb mercury and other toxic air pollution, power plants are going to need to be vigilant to keep their emissions up to code.

The EPA estimates that the mercury and air toxins addition will cost utilities companies nearly $11 billion a year—this is on top of the $21 billion cost associated with ongoing clean air regulations.

But that’s not to say that all energy and utilities companies will be hurt by these new regulations. In fact, those that are first to embrace biofuels and other sources of renewable energy oftentimes find themselves on the receiving end of government support. This administration has made the largest investment in clean energy in U.S. history, helping to double renewable energy production in the past four years. The big winners over the past few years have been wind, solar and geothermal energy.

That being said, if you’ve placed a big bet on energy and utilities, you may want to start rethinking your strategy. As a starting point, here are the 19 alternative energy and utilities companies that are buys right now in my Portfolio Grader stock rating system.

(Now, I’ve also included players from outside the U.S., and that’s because Obama Administration has also lowered trade barriers and tariffs to “environmental goods and services” from abroad. This move will undoubtedly fatten the profits of some international players as well.)

Symbol Company Name Quantitative Grade Fundamental Grade Total Grade
ADGE American DG Energy Inc. A C B
ARTNA Artesian Resources Corp. Cl A B C B
AWK American Water Works Co. A C B
AWR American States Water Co. A B B
BKH Black Hills Corp. B C B
CHC China Hydroelectric Corp. ADS A C B
CHG CH Energy Group Inc. (Holding Co.) A C B
CMS CMS Energy Corp. A C B
CPN Calpine Corp. B C B
DTE DTE Energy Co. A C B
HNP Huaneng Power International Inc. ADS A B A
NGG National Grid PLC ADS A C B
NI NiSource Inc. B C B
PCG PG&E Corp. B C B
SBS Companhia de Saneamento Basico do Estado de Sao Paulo ADS A B A
SCG SCANA Corp. B C B
SRE Sempra Energy A C B
WEC Wisconsin Energy Corp. A B B
WTR Aqua America Inc. A C B

But just because a company is green doesn’t mean that it has a green light to buy. I would recommend that you stay away from the following 21 companies:

Symbol Company Name Quantitative Grade Fundamental Grade Total Grade
AEE Ameren Corp. F C D
AES AES Corp. F C F
AT Atlantic Power Corp. D C D
AVA Avista Corp. D D D
CNP CenterPoint Energy Inc. D D D
CWT California Water Service Group D B D
D Dominion Resources Inc. (Virginia) D D D
DYN Dynegy Inc. F C F
ED Consolidated Edison Inc. D C D
EOC Empresa Nacional de Electricidad S.A. ADS D C D
GNE Genie Energy Ltd. Cl B D C D
MDU MDU Resources Group Inc. D D D
NRG NRG Energy Inc. D D D
ORA Ormat Technologies Inc. D D D
PEG Public Service Enterprise Group Inc. D C D
SJW SJW Corp. D B D
SYMX Synthesis Energy Systems Inc. D C D
TAC TransAlta Corp. F D F
TE TECO Energy Inc. F C D
TRIT Tri-Tech Holding Inc. F C D
VE Veolia Environnement S.A. ADR F C D

Tomorrow’s the day that we receive the latest estimate for third-quarter GDP, and you can bet that I’ll be covering that in this blog. So please stay tuned!

Sincerely,

Louis Navellier

Louis Navellier

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