2012's Hottest Investing Idea: Boring Utility Stocks?

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Looking for a hot investing idea? Try the most boring industry imaginable: utilities.

At least that's according to David Parker, star analyst at Baird, quoted by the AP.

According to Parker, shares of power companies appear to be attractive investments this year as the industry invests in new power plants and other infrastructure projects to meet new environmental standards.

Parker estimates the industry will spend $750 billion over the next decade to maintain the electrical grid, meet stronger environmental standards, and satisfy expanding or changing customer needs.

Business section: Investing ideas
Looking for ways to get an exposure to this trend?

To help you get started, we analyzed profitability data on 170 utility companies and identified a list of 10 that have proven themselves to be more profitable than their competitors, based on gross and net profit margins.

These utility stocks have a track record of being more profitable than their competitors - -does that make their 2012 outlook more stable?

List sorted by market cap. (Click here to access free, interactive tools to analyze these ideas.)

1. Southern Company (NYS: SO) : Operates as a utility company that provides electric service in the southeastern United States. TTM gross margin at 32.53% vs. industry average at 26.95%. TTM operating margin at 23.19% vs. industry average at 18.26%. TTM pre-tax margin at 19.09% vs. industry average at 13.97%.

2. Dominion Resources: Engages in producing and transporting energy in the United States. TTM gross margin at 30.32% vs. industry average at 27.04%. TTM operating margin at 23.32% vs. industry average at 18.03%. TTM pre-tax margin at 16.77% vs. industry average at 13.23%.

3. Duke Energy (NYS: DUK) : Operates as an energy company in the Americas. TTM gross margin at 34.8% vs. industry average at 27.05%. TTM operating margin at 22.49% vs. industry average at 18.34%. TTM pre-tax margin at 18.69% vs. industry average at 13.86%.

4. Exelon (NYS: EXC) : Operates as a utility services holding company in the United States. TTM gross margin at 29.99% vs. industry average at 27.05%. TTM operating margin at 22.53% vs. industry average at 18.34%. TTM pre-tax margin at 19.63% vs. industry average at 13.86%.

5. American Electric Power: Engages in the generation, transmission, and distribution of electric power to retail customers. TTM gross margin at 31.27% vs. industry average at 27.05%. TTM operating margin at 20.26% vs. industry average at 18.34%. TTM pre-tax margin at 16.17% vs. industry average at 13.86%.

6. PPL (NYS: PPL) : Generates and sells electricity; and delivers natural gas to approximately 5.3 million utility customers primarily in the northeastern and northwestern US. TTM gross margin at 36.24% vs. industry average at 26.95%. TTM operating margin at 27.79% vs. industry average at 18.26%. TTM pre-tax margin at 18.59% vs. industry average at 13.97%.

7. Public Service Enterprise Group (NYS: PEG) : Operates in the energy industry primarily in the northeastern and mid Atlantic United States. TTM gross margin at 33.74% vs. industry average at 27.04%. TTM operating margin at 25.2% vs. industry average at 18.03%. TTM pre-tax margin at 20.06% vs. industry average at 13.23%.

8. Enersis: Engages in the generation, transmission, and distribution of electricity in Chile, Argentina, Brazil, Colombia, and Peru. TTM gross margin at 30.49% vs. industry average at 27.05%. TTM operating margin at 24.23% vs. industry average at 18.34%. TTM pre-tax margin at 21.16% vs. industry average at 13.86%.

9. Companhia Paranaense de Energia: Engages in the generation, transmission, distribution, and sale of electricity for industrial, residential, commercial, and rural customers primarily in the State of Parana, Brazil. TTM gross margin at 31.72% vs. industry average at 26.95%. TTM operating margin at 24.03% vs. industry average at 18.26%. TTM pre-tax margin at 21.59% vs. industry average at 13.97%.

10. Pinnacle West Capital: Provides retail and wholesale electric services primarily in the State of Arizona. TTM gross margin at 35.41% vs. industry average at 27.05%. TTM operating margin at 22.32% vs. industry average at 18.34%. TTM pre-tax margin at 15.99% vs. industry average at 13.86%

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.


Kapitall's Eben Esterhuizen does not own any of the shares mentioned above.

At the time this article was published Motley Fool newsletter services have recommended buying shares of Exelon, Southern, and Dominion Resources. Motley Fool newsletter services have recommended creating a write covered strangle position in Exelon. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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