4 Low-Beta Utility Stocks to Buy Amid Ongoing Market Volatility
Volatility has returned to Wall Street after the rally, which started in early January, came to a sudden halt last week after fresh data showed that inflation rose last month. An unexpected jump in inflation has once again dimmed hopes of the Federal Reserve going for its first rate cut in March.
The Commerce Department last week reported that the consumer price index (CPI) rose 0.3% month over month in January and 3.1% from a year ago. Also, core CPI, which excludes the volatile energy and food prices, rose 0.4% sequentially and 3.9% year over year in January.
The hotter-than-expected inflation reading has dented consumers’ confidence, with growth stocks taking a hit as the Federal Reserve will reassess the timing of its first rate cut.
The Federal Reserve had earlier indicated that a rate cut in March was unlikely as inflation was still above its 2% target, the plans are now off the table.
Markets are now expecting the first interest rate cut in May but the Federal Reserve will watch inflation data over the next few months before taking the final decision.
However, nothing is clear right now as the minutes of the Federal Reserve’s last FOMC meeting revealed that central bank officials are in no rush to cut rates, and are waiting to have “greater confidence” that inflation is cooling.
The Nasdaq fell for the third straight session following the release of the Fed minutes.
Our Choices
Given this situation, investing in stocks from the utility sector, such as DTE Energy Company DTE, American Water Works Company, Inc. AWK, Fortis, Inc FTS and Consolidated Water Co. Ltd. CWCO, seems a prudent choice. These companies are considered defensive due to their non-cyclical nature and their affiliation with the utilities sector. This implies that fluctuations in the market have minimal influence on these businesses.
Also, our picks are from the category of low-beta stocks (beta greater than 0 but less than 1). Hence, the recommended approach is to invest in low-beta utility stocks with a favorable Zacks Rank. Each of the stocks has a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
DTE Energy Company is a holding company with subsidiaries engaged in regulated and unregulated energy businesses. DTE’s two largest regulated subsidiaries comprise DTE Electric Company and DTE Gas Company. DTE Energy also has three non-utility segments engaged in a variety of energy-related businesses. DTE’s unregulated businesses include gas storage and pipelines; power and industrial projects, and energy trading operations.
DTE Energy has an expected earnings growth rate of 16.9% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.4% over the last 60 days. DTE currently has a Zacks Rank #2 and a beta of 0.64.
American Water Works Company, Inc. provides essential water services to over 14 million customers in 24 states and has an employee strength of 6,500. AWK also acquires small water service providers to expand its customer base.
American Water Works Company has an expected earnings growth rate of 6.1% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.8% over the last 60 days. AWK presently carries a Zacks Rank #2 and has a beta of 0.65.
Fortis, Inc. is engaged in electric and gas utility business. FTS offers regulated utilities comprising electric and gas as well as engages in non-regulated hydroelectric operations. Fortis operates primarily in Canada, the United States and the Caribbean.
Fortis has an expected earnings growth rate of 4% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 2.6% over the last 60 days. Currently, FTS carries a Zacks Rank #2 and has a beta of 0.44.
Consolidated Water Co. Ltd., along with its subsidiaries, is involved in the development and operation of seawater desalination plants and water distribution systems in areas where naturally occurring supplies of potable water are scarce or nonexistent. CWCO also focuses on expanding operations in areas with a large proportion of tourist properties and a growing population.
Consolidated Water Co. has an expected earnings growth rate of 225.9% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.6% over the last 60 days. CWCO presently has a Zacks Rank #2 and a beta of 0.12.
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DTE Energy Company (DTE) : Free Stock Analysis Report
American Water Works Company, Inc. (AWK) : Free Stock Analysis Report
Consolidated Water Co. Ltd. (CWCO) : Free Stock Analysis Report
Fortis (FTS) : Free Stock Analysis Report
