The most electrifying utility stock, according to a consensus of more than 31,000 rated investors participating in Motley Fool CAPS, isn't an American stalwart like TXU, Dominion Resources, or American Electric Power. In fact, neither of those Yankee power providers even makes the CAPS investors' top 10. Nope. The best utilities stock is a state-controlled firm facing some spooky political risks.
Really.
Huaneng Power International (NYSE: HNP ) , the largest independent electricity producer in China, has maintained its five-star status on CAPS for several months now, and even with the stock nearly doubling over the past year, our CAPS community still doesn't see any brownouts ahead. Even though the Chinese government owns a majority stake in Huaneng, thereby exposing the company to all sorts of risks, such as pricing and environmental regulation, each of the 192 CAPS All-Stars who've rated Huaneng are bullish. Five stars is the highest rating a stock can get in CAPS.
So for our Fools, anyway, the opportunity to own the dominant power producer in China -- you know, the country with the biggest population and fastest-growing economy in the world? -- outweighs any possible bite that may come from the dragon's teeth.
And what companies make up the rest of top 10, you ask?
|
Company
|
Market Cap, in Millions
|
|
Companhia Paranaense de Energia (NYSE: ELP )
|
$4,500
|
|
ONEOK
|
$5,400
|
|
E.ON (NYSE: EON )
|
$107,260
|
|
Comphania Sanea ADS (NYSE: SBS )
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$5,020
|
|
MetroGas
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$296
|
|
Enersis (NYSE: ENI )
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$12,730
|
|
PG&E (NYSE: PCG )
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$15,870
|
|
International Power
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$13,000
|
|
Northeast Utilities (NYSE: NU )
|
$4,320
|
As always, none of the companies on this list should be considered formal recommendations, but rather as suggestions for further research. After all, when so many Fools feel so strongly about a group of stocks, you'd probably do well to utilize this list of utilities.
Foreign values with star power
The 10 companies all vary in market cap and the dividend yield they provide, with the average yield being in the 3% range. However, there's one fairly obvious trait that most of the companies on our list share: They're not made in the USA.
Seven of the 10 stocks are foreign utilities, with Europe and Asia both having some sort of representation on the list. Latin American utilities, however, dominate our power chart, accounting for nearly half of the top 10 -- Enersis, Paranaense de Energia, MetroGas, and Comphania Sanea. It's pretty clear, then, that our community is using boring old utilities as a favorite way to play population, economic, and energy-consumption growth all around the world -- especially in an emerging, underdeveloped market like Latin America.
Another notable trend in the group is strong operating margins and fairly attractive valuations. Six of the 10 companies have EBITDA margins above 30%, with an average of about 27%, while the average P/E for the group is roughly 14.5. That may not look very cheap, but when you consider that the average P/E for foreign utilities is roughly 20, these above-average stocks may be selling at a pretty reasonable price right now.
But what do you think? Does Huaneng Power deserve to top our power chart? How about the other companies on our list? To turn the lights on for your fellow Fools, join Motley Fool CAPS today. Make a strong enough case for your favorite utilities stock, and it just might do an electric boogaloo (or sliiide) straight to the top.
ONEOK is a
Motley Fool Income Investor
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Fool contributor Brian Pacampara owns no position in any of the companies mentioned. The Fool has a disclosure policy.
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