It's been an active year for mergers and acquisitions in the utility sector. We discuss our key takeaways from a major deal that closed ahead of schedule and highlight some of the main themes that will be in play going forward.
Consolidation continues apace in the utility sector, as operators seek to take advantage of frothy stock prices to improve their economies of scale and increase their exposure to growing demand for natural gas.
We update our takes on the various pending acquisitions involving the more than 200 essential-services stocks that we cover in our Utility Report Card.
The recent spate of equity issuance is yet another sign of frothy valuations in the utility sector, but these moves set the stage for future growth. Investors should bide their time and wait for a pullback to buy our favorite utility stocks.
Last month, Barron's published a sensationalist article warning of a looming death spiral for US electric utilities and traditional power generators. Although stretched valuations may mean that utility stocks are overdue for a pullback in the near term, the sector's future prospects remain undiminished.
The upcoming election season is heating up, but overheated valuations are a bigger concern for investors in utility stocks. With a highly contentious presidential race likely to stoke strong emotions, investors should keep a level head and focus on what can actually change with election results. Above all, remember to bet on probabilities, not your personal politics.
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