The global market is a little choppy at the moment, thanks to a likely hike in interest rates and the uncertainty surrounding the Presidential Election in the U.S., as well as volatile oil prices and sluggish growth in China. Due to these concerns, the World Bank recently lowered its 2016 global growth forecast to 2.4% from the January projection of 2.9%.
Developing countries that export commodities are having a tough time with soft prices. Naturally, the growth prospects in developing and emerging markets are bleak. Back home, manufacturers are suffering due to a strong dollar, which is increasing the price of their products. If the dollar continues its post-Brexit bull run, export prospects of U.S. manufacturers could be significantly hampered.
Utilities have been facing their own share of problems from increasingly stringent emission regulations and rate hike speculations. In Dec 2015, the Fed increased interest rates for first time since 2006 and stated plans to further raise the same as and when conditions are suitable.
On the brighter side, the U.S. economy is seeing definite signs of improvement, which prompted Fed chair Janet Yellen to reconsider a rate hike in the near future. And, as we know, a high-rate environment typically hurts the prospects of utility companies.
By their very nature, utilities routinely seek help from capital markets for upgrades and maintenance of their infrastructure. Even though regulated utilities are known for their cash generating capacity, funds generated from their internal operations are often less than enough to execute long-term projects. This means that a rise in interest rates will increase the cost of capital for utilities.
However, turmoil in the global economy could divert investor focus toward domestically oriented utilities, which are immune to the international market volatility and impact of the strong dollar. The year-to-date return from Dow Jones Utility Average (DJU) was 15.4%, compared with the S&P 500’s 6.2%. We have considered five utilities that are likely to provide solid returns in September.
Picking the Right Stocks
Recognizing a stock with good prospects is no mean feat. But thanks to our new Style Score System, we have been able to identify a few stocks with incredible near-term growth potential.
Our research shows that stocks with a VGM score of ‘A’ or ‘B’, when combined a Zacks Rank #1 (Strong Buy) or #2 (Buy), offer the best investment opportunities for investors.
Spark Energy, Inc. SPKE is an independent retail energy services company. The company is involved in the retail distribution of natural gas and electricity.
This Zacks Rank #1 stock, with a VGM Score of A, registered a positive earnings surprise of 3.50% in the last reported quarter and has returned 39.9% year to date.
SPARK ENERGY Price
SPARK ENERGY Price | SPARK ENERGY Quote
Otter Tail Corporation OTTR is involved in the electric, manufacturing and plastics business across the U.S., Canada, Mexico and Panama.
This Zacks Rank #2 stock, with a VGM Score of B, reported a positive earnings surprise of 7.90% in the last reported quarter and the stock has returned 28.6% year to date.
OTTER TAIL CORP Price
OTTER TAIL CORP Price | OTTER TAIL CORP Quote
Nippon Telegraph and Telephone Corporation NTT, along with its subsidiaries, provides fixed and mobile voice-related services, IP/packet communications services, and other telecommunications-related services in Japan and other countries.
This Zacks Rank #1 stock with a VGM score of A has returned 10.8% year to date.
NIPPON TELE-ADR Price
NIPPON TELE-ADR Price | NIPPON TELE-ADR Quote
Korea Electric Power Corporation KEP an integrated electric utility company that generates, transmits and distributes electricity in Korea and other countries.
This Zacks Rank #2 stock with a VGM score of A has returned 22.1% year to date.
KOREA ELEC PWR Price
KOREA ELEC PWR Price | KOREA ELEC PWR Quote
Companhia Energética de Minas Gerais S.A., CIG through its subsidiaries, engages in the generation, transmission, distribution and trading of electricity in Brazil.
This Zacks Rank #2 stock with a VGM score of A has returned 78% year to date.
CEMIG SA -ADR Price
CEMIG SA -ADR Price | CEMIG SA -ADR Quote
Where Do Zacks' Investment Ideas Come From?
You are welcome to download the full, up-to-the-minute list of 220 Zacks Rank #1 "Strong Buy" stocks free of charge. There is no better place to start your own stock search. Plus you can access the full list of must-avoid Zacks Rank #5 "Strong Sells" and other private research. See the stocks free >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
CEMIG SA -ADR (CIG): Free Stock Analysis Report
KOREA ELEC PWR (KEP): Free Stock Analysis Report
OTTER TAIL CORP (OTTR): Free Stock Analysis Report
NIPPON TELE-ADR (NTT): Free Stock Analysis Report
SPARK ENERGY (SPKE): Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research