In Search Of Growth Utilities

2/14/2011


For our Top 15 Utilities portfolio, we seek companies with superior growth potential. Of course, we're talking about utilities, not Apple ($355; AAPL), and "superior growth" doesn't mean the same in every sector.

The 15 stocks in our portfolio averaged growth of 6% in sales and 17% in per-share profits over the last 12 months, which is pretty good in an industry averaging 3% sales growth and 11% profit growth. To ensure that the growth is backed by solid fundamentals, we also gravitate toward stocks with high Quadrix® scores.

Our Top 15 Utilities average an Overall score of 67. While we generally focus on stocks with substantially higher scores, few utilities earn high Overall scores. In fact, only 6% of utility stocks in our Utility Update earn Overall scores above 80, and the average for the sector is 53.

TOP 15 UTILITIES PORTFOLIO
12-Mo. Trailing
---- Growth ----
Quadrix
------ Scores ------
Sector-Specific
------- Scores -------
Company (Price; Ticker)
Yield
(%)
Sales
(%)
EPS
(%)
Trailing
P/E
Ratio
Value
Overall
12-
Factor
Reranked
Overall
AGL Resources
($38; AGL)
4.7
(6)
6
12
82
50
66
50
Avista
($23; AVA)
4.3
2
7
15
82
71
61
80
Cleco
($32; CNL)
3.2
20
24
15
72
66
78
77
DPL ($27; DPL)
5.0
15
5
12
89
84
96
96
DTE Energy
($46; DTE)
4.8
5
7
13
83
51
68
62
Energen
($59; EGN)
0.9
10
25
13
70
87
84
99
Entergy
($73; ETR)
4.6
7
1
10
94
74
94
87
Exelon
($43; EXC)
4.9
8
(8)
11
90
62
91
74
NextEra Energy
($55; NEE)
3.6
(2)
18
13
88
75
93
84
PPL ($25; PPL)
5.6
14
120
8
93
76
95
95
Public Svc. Ent.
($33; PEG)
4.2
(4)
11
10
89
79
89
91
Southern Union
($28; SUG)
2.2
5
(14)
15
65
50
59
46
TECO Energy
($18; TE)
4.5
5
22
14
77
57
73
66
UniSource Energy
($36; UNS)
4.3
3
6
13
90
69
77
76
Westar Energy
($26; WR)
4.8
12
33
14
80
63
90
79
Portfolio Average
4.1
6
17
13
83
67
81
78
Industry Average
3.9
3
11
16
71
53
50
50
Note: Quadrix scores are percentile ranks. While traditional Quadrix scores rank stocks relative to our resarch universe of more than 4,300 stocks, the sector-specific stocks compare stocks within the same sector.

We also tend to prefer stocks that look strong as measured by our sector-specific scores. The 12-Factor Sector score considers a dozen statistics that work particularly well for utilities. The Reranked Overall score starts with the same category scores used to derive the traditional Overall score and reweights them to favor those that work well for utilities. The stocks in our Top 15 Utilities portfolio average 12-Factor Sector scores of 81 and Reranked Overall scores of 78.

In recent years, our focus on quality and growth has paid off. Since its inception in 2007, the Top 15 Utilities portfolio has returned 21.0%, versus 5.6% for its benchmark, the S&P 1500 Utilities Sector Index. For investors seeking yield close to that of the average utility stock, as well as superior growth potential, consider purchasing equal-dollar positions in the 15 stocks listed in the table above.


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