Growing up in Kansas, you get used to a few things:
- Brutal winters.
- Unbearable summers.
In the winter, the wind chill factor made it feel 10-15 degrees colder when it was already in the single digits.
In the summer, increased humidity from the abundance of crops pulling water into the air pushed the heat index to sweltering levels. It felt like breathing underwater.
Winter and summer are the busiest times for heating and air conditioning companies because, for some reason, those are the two seasons when the heater or air conditioner chooses to break down.
This leads me to today’s stock recommendation.
It’s an established company that sells home heating and air conditioning products as well as diesel, gasoline and home heating oil.
It rates a 99 overall on Adam O’Dell’s Green Zone Ratings system.
Pro tip: This stock was the highest-rated stock in our weekly hotlist. To find out more about our weekly hotlist, click here.
There’s a trend in utilities that will push this company even higher in the coming months.
Utilities Sector Moving Higher
The S&P Utilities Select Sector Index tracks utilities stocks on the S&P 500.
Some of the largest utility exchange-traded funds (ETFs) are linked to this index.
Pattern Emerging in Utilities Sector
The chart above shows the movement of the Utilities Select Sector over the last 12 months.
While the Index has grown 14% over that time, there is a trend in that movement.
In each of the highlighted gray areas, there is the bottoming of the sector, followed by a nice uptrend.
The last bottoming was only a few weeks ago, and the Index has already started to move higher.
I think the latest uptrend is going to surpass November 2020 when it reached over 675 points.
Utilities Stock to Buy: Star Group Is Strong
Utilities are a fact of life. You have to have them.
Even if your home is completely green, or even reliant on natural gas, a utility has to supply the power to you.
One of the strongest utilities is Star Group L.P. (NYSE: SGU).
While it doesn’t supply energy directly, it does sell heating and air conditioning products to residents as well as commercial home heating oil and propane.
It also sells diesel and gasoline on a delivery basis and provides plumbing services.
The company’s gross profit went from $463.3 million in 2018 to $475 million in 2020.
Star’s earnings before interest, taxation, depreciation and amortization (EBITDA) went from $66 million in 2019 to $123.8 million in 2020.
Star’s Stock Price Continues to Rise
After hitting a low of $6.45 per share in March 2020, Star’s stock price has risen consistently over the last 12 months.
It’s jumped more than 61% to where it is priced today — more than $10 per share.
It certainly fits the “buy high, sell higher” philosophy that Adam, Charles Sizemore and I follow.
SGU Outperforms the S&P Utilities Sector
Remember the Utilities Select Index I told you about before?
Star Group’s stock price (yellow line) has outgained the broader Index (green line) by nearly 40% over the last 12 months. That certainly makes SGU a utilities stock to buy.
Adam’s Green Zone Ratings system scores SGU a 99 overall — meaning only 1% of all other stocks rate higher.
We are “Strong Bullish” on SGU and expect it to blast the broader market by three times over the next 12 months.
SGU ranks in the green in five of the six factors, including value (98), volatility (98), size (92), growth (84) and quality (79).
It does rank low in momentum (39) due to its sideways trading from August 2020 to January 2021.
Bottom line: The U.S. Energy Information Administration said the prices of natural gas liquids, like natural gas and propane, have started to fall.
That means the products sold by Star Group are getting cheaper.
We are also entering a time when millions of Americans will start fixing their air conditioning units before the hot summer months.
Demand for Star Group’s products and services will continue to grow.
And now the perfect time to buy SGU high and sell higher in the coming months.
Research Analyst, Money & Markets
Matt Clark is the research analyst for Money & Markets. He’s the host of our podcast, The Bull & The Bear, as well as the Marijuana Market Update. Before joining the team, he spent 25 years as an investigative journalist and editor — covering everything from politics to business.