December means a lot of things: Christmas; the end of the year; the release of whatever Oscar bait Tom Hanks is in that year. But for much of the US it also signals the beginning of the winter, and the expensive heating bills that come with it. Nothing merry about that!
Well, unless you’re a company on the receiving end of those bills, or a retail player invested in one of those companies. In that case, the winter means a time of increased revenue and increased profits. Happy holidays indeed!
Our Methodology For Finding Hot Gas Utilities
To find what plays would most be of interest to retail investors looking for a utility play on the cusp of the yearly heating surge, we laid out some criteria to narrow the field. Specifically, we looked for companies that:
1) Has an Analyst Consensus of “Buy” or Better
While you can’t trust the experts one hundred percent of the time, first thing we did was eliminate companies that did not have at least a “buy” rating. Because when a company does not have at least that rating, you’ve probably got a stinker on your hands. After all, x percent of companies have at least a buy, so it’s good to start there.
2) Must be a Gas Company
We focused on gas utilities as opposed to electric or water, as gas companies are most affected by the wintry raise in heating costs.
3) Must Pay a Dividend of Three Percent or Over
Dividend stocks can be an attractive option for retail investors, as dividends provide a kind of psychological incentive to save and diversify investment. Unlike tech and healthcare, utilities as a sector are not dependent on innovation, and are thus not greatly hampered by offering dividends.
4) Must be a Small Cap
We decided to limit our search to companies that are worth between $300 million and $2 billion, as small caps provide a nice balance of both the stability of larger plays with the chance for rapid, exponential growth that of a smaller company.
Our Results AKA Three Gas Companies on the Up and Up
After utilizing this criterion, we identified three small-cap gas companies that fit the bill:
Summit Midstream Partners, LP (SMLP)
This gas gathering and compression services play operates throughout the Western US, serving producers in Colorado, Texas, the Bakken Shale and Virginia. The company is headquartered in Dallas, TX.
Market-Cap: $847.79 Million
Performance YTD: +80.49 percent
Laclede Group Inc. (LG)
Based in St. Louis, Mo., this gas holding company is the largest distributor in the great state of Missouri. Laclede is the eight oldest company that currently trades on the New York Stock Exchange, having first listed in 1889.
Market-Cap: $1.49 billion
Performance YTD: +21.57 percent
South Jersey Industries (SJI)
As their name implies, South Jersey Industries is located in Florida. Kidding. Headquartered in Folsom, New Jersey, this holding company headquartered has been in operation since 1910.
Market-Cap: $1.79 billion
Performance YTD: +14.16 percent
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