Happy Monday afternoon to everyone on The Street. 

And happy holidays, Street Team! Hope you all have a relaxing and celebratory week ahead of you as 2024 draws to a close.

On that note, we’re going to be switching up our programming a bit this week, so we can spend a little more quality time with loved ones — and drink a lot more eggnog, without worrying about having to compose a coherent newsletter afterward.

So throughout this week, rather than our usual column, “Tomorrow’s Trade Idea, Today”, we’ll be spotlighting “Yesterday’s Top Trade Idea, Today”: a handful of our previous stories that aged like fine wine.

We truly love digging through analyst notes day in and day out in the hopes of providing value to you, our readers. But after a long year, we hope you will allow us the luxury of resting on our laurels for a week, while we catch our breath.

(And remember, history might not repeat itself… but it usually rhymes.)

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YESTERDAY’S TOP TRADE IDEA, TODAY

The story below was originally published on 5/22/2024. Since then, Vistra (VST) has risen roughly 50%, for a total YTD gain of 263%, outpacing the S&P 500’s gain of just over 24%, as of Friday, December 20.

Oh, and Constellation Energy (CEG) did, in fact, partner directly with Microsoft (MSFT), just a few months later. Its stock also soared on the news.

Not Your Mom’s Utility Company

Bucking the Trend

Energy and utility companies are notoriously sensitive to interest rates due to their highly leveraged nature. They typically don’t fare well in higher-for-longer environments – like the one we’re in now. 

However, this year has seen just the opposite. Utilities are up 18% over the past three months, outperforming the overall market and big tech companies. 

According to Guggenheim Securities analyst Shahriar Pourreza, right now utilities are more fundamentally sound than they’ve been in the past 20 years.

Powering the Future

According to Pourreza, this shift comes as utilities become valued for their future growth potential. The sector was down 10% in 2023, far below the overall market. The analyst believes the market went overboard with pricing in interest rate challenges. 

Now, investors can see a future where utilities play a crucial role in powering data centers, AI, and increased residential electricity demand. 

According to Wells Fargo (WFC), by 2030 US electricity demand could rise 20%, with 8% of total demand coming from data centers. Stephanie Link of HighTower Advisors calculates that between now and 2050, $4 trillion will need to be spent to meet this demand.

Stock Picks

To capitalize on the data center boom, Pourezza recommends companies that have deregulated assets, allowing them to quickly respond to changing market conditions. He highlighted three energy stocks that fit the bill: Constellation (CEG), NextEra (NEE), and Vistra (VST). 

According to the analyst, Constellation and Vistra have the potential to partner directly with companies like Amazon (AMZN), Alphabet (GOOGL), and Microsoft (MSFT). He also expects NextEra to partner with hyperscalers due to its deregulated renewable assets.

AI is changing the world, and that takes a lot of power. These stocks could energize the future of tech.

Original Poll Results

Which stock do you think will outperform over the next 12 months?

🟨🟨🟨🟨🟨🟨 Constellation (CEG)

🟩🟩🟩🟩🟩🟩 NextEra (NEE)

🟨🟨🟨🟨⬜️⬜️ Vistra (VST)

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