Top Picks 2021: NextEra Energy (NEE)

Our selection of NextEra Energy (NEE) is partially defensive; I think that after 2020’s strong finish, a substantial market correction — or worse — is likely, explains Timothy Lutts, editor of Cabot Stock of the Week.

This recommendation is also partially offensive, in that I think this sector has some very good growth coming in the years ahead.

The sector, of course, is electric utilities; NextEra is the largest in the U.S., with Florida Power & Light its largest division.

The company has a firm growth trend in place today (average annual revenue growth over the past five years was 3%), but I expect that to accelerate in the years ahead as demand from the electric vehicle market grows; Elon Musk thinks demand for electricity could double!

And as costs fall — NextEra Energy is big into renewable energy, where scale is bringing costs down — profits should mushroom!

Valuation is a little high now based on the past five years’ average, but technically the stock’s uptrend is solid, though given a choice, I’d wait for a pullback to the 50-day moving average.

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