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https://troweprice.com/personal-investing/resources/insights/finding-overlooked-opportunities-in-the-covid-19-market.html?cid=PI_Investment_Pilot_CAF_NoRM_EM_NonSubscriber_202009&bid=506188743&PlacementGUID=em_PI_PI_Investment_Pilot_CAF_NoRM_EM_NonSubscriber_202009-PI_Investment_Pilot_CAF_NoRM_EM_NonSubscriber_202009_20200929DG: One of our favorite sectors continues to be utilities. The equity market has yet to fully grasp just how attractive utilities are today relative to the past. The emergence of low-cost renewables is a game changer for the industry. This megatrend will likely continue for the next two decades to drive an elongated cycle for replacing coal, nuclear, and inefficient natural gas with wind, solar, and battery solutions that can drive mid- to high-single-digit rate base growth, mid-single-plus earnings per share growth with attractive dividends, only modest growth in customer bills, and a dramatic reduction in carbon emissions. Given this very attractive long-term outlook combined with this significant underperformance, we believe the long-term opportunity for utilities is compelling.
Utilities is the one sector in which higher taxes don’t negatively impact earnings, as taxes are a pass-through item from a regulatory standpoint. Utilities would also benefit from a likely extension, and potential expansion, of wind and solar tax credits for renewables.
Also discussed opportunities in fixed income.