NextEra Energy Inc. (NYSE: NEE) – As Fed hikes rates, it’s time to pivot to low beta stocks

[NYSE: NEE]: Yesterday, the FED announced that it was raising interest rates and that two more rate hikes could be in the offing in 2019.  This has seen an overall decline in the stock markets. Stocks were already sluggish due to the growing uncertainty in the macroeconomic environment, including the trade war between the U.S and China. In this increasingly volatile environment, it is more prudent to pivot towards low beta stocks. These are stocks that have a very low correlation to the market, and may not drop much in case of a major market correction.

One such stock is NextEra Energy Inc. (NYSE: NEE). This stock has a beta of -0.16. This means that it is a stock that has a high likelihood of going contrary to the overall market. When the markets are going up, stocks with negative beta tend to stagnate or drop, and vice versa.  In essence, NextEra Energy Inc. a company that has negative beta is likely to keep gaining in spite of the market drop.  This makes it a safe hold now that the market is looking weak due to the decision by the Federal Reserve to hike rates. The company is already showing signs of stability, and possible bullish sentiment. Yesterday, most stocks closed the day in the red. However, NextEra Energy Inc. (NEE) has held on to its value and closed the day down by under a percentage. This is a plus in a day when most stocks lost by more than 5%.

But there is more to this stock that just having a low beta. One aspect to NextEra Energy Inc. (NYSE: NEE) that makes it a worth hold is its focus on renewable energy.  The company is heavily invested in wind and solar, and this is perfectly aligned with the world’s energy needs of the future. Governments all across the world are instituting measures to fight climate change, as can be seen in the majority support for the Paris climate agreement.  Even at an individual level, people are beginning to realize the importance of using sustainable energy sources as a way of protecting the world.



This growing demand for renewable energy sources reflects quite well in NextEra Energy Inc.’s stock. From its books, the company has a profit margin of 51.24%. This is an indicator that demand for the company’s products is high, allowing it to charge a premium and still draw in clients. It also means that the company has a high enough market share to be in a  position to set prices at a level that gives it the ability to set prices at levels that can give it a good margin on sales. The company also has a negative levered free cash flow. This is an indicator that it is making investments that will give it higher returns in the future.

With such strong fundamentals, NextEra Energy Inc. (NYSE: NEE) comes off a company worth keeping an eye on, both in the short-term and the long-run.

SHARE
Previous articleKraft Heinz Company (KHC) – Sentiment negative, but is it that bad?
Next articleFacebook Inc (NASDAQ: FB) transitioning into new revenue sources: What are the prospects?