As an investor, it doesn't pay to follow the crowd.
In this series, though, we highlight a possible exception -- the collective wisdom of our CAPS community. Read the next section if you're unfamiliar with our methodology. Skip it if you want to go straight to the results.
Why this crowd is different
Jumping into a stock because your rich neighbor did, or because you heard about it from your friend's uncle who used to work on Wall Street, or because CNBC has been talking about it nonstop is a recipe for disaster.
If there's one thing I've learned as a stock analyst, it's that any stock can be gussied up to sound like a world-beater. If there's a second thing I've learned, it's that being a smart person doesn't make you a good investor.
In the hands of a smart person with good communication skills, the never-were and never-will-be stocks sound like tickets to instant fortune. The ancient Greek philosophers made the distinction between rhetoric and knowledge. The former is convincing; the latter is true.
That's why we factor in track record in our Motley Fool CAPS community. We invite everyone to give stocks an outperform (akin to a "buy" call) or underperform rating (akin to a "sell" call) in CAPS. We then use those opinions to calculate a rating for each stock -- from one to five stars (five being the best). But -- and this is a big distinction -- we give more weight to the opinions of folks whose picks have performed well in the past.
The 7 most popular utilities buys
With that methodology as prelude, I present to you the top 7 utilities stocks based on the number of CAPS members who have rated the stock an outperform. I only included stocks that rated four or five stars (i.e., that are consensus outperforms).
|
Company |
Market Capitalization (in millions) |
52 Week Price Change % |
Price-to-Earnings (TTM) |
CAPS Rating (out of 5) |
Outperform Picks |
|---|---|---|---|---|---|
|
Duke Energy |
$22,695 |
10% |
33.1 |
**** |
1,728 |
|
China Natural Gas |
$112 |
(46%) |
5.5 |
**** |
1,558 |
|
Exelon Corporation |
$25,071 |
(21%) |
10.5 |
***** |
1,469 |
|
NextEra Energy |
$22,576 |
(4%) |
12 |
***** |
1,086 |
|
Otter Tail |
$663 |
(23%) |
73.8 |
***** |
1,083 |
|
A-Power Energy Generation Systems |
$328 |
(18%) |
724 |
**** |
1,042 |
|
Companhia de Saneamento Basico |
$4,474 |
11% |
5.2 |
***** |
1,032 |
Source: Motley Fool CAPS. TTM = trailing 12 months.
Since many investors flock to the massive dividend yields in the utilities sector, it's surprising that a number of the most popular utilities stocks do not pay a dividend. China Natural Gas, for instance, is a small distributor of (you guessed it) natural gas in China.
More CAPS members think Duke Energy (with its 5.6% dividend yield) is an outperform than any other four- or five-star utility. Do you think another stock deserves the top spot? Do you think Duke Energy is overrated? Make your thoughts known in CAPS by clicking here. Or just go there to do further research on one of these popular stocks.
