What Is One of the Best Energy Stocks to Hold for the Next 10 Years?
Key Points
Vistra has more pricing power than many utility companies.
It's poised to benefit from a surge in energy demand from data centers.
- 10 stocks we like better than Vistra ›
If you're wondering which energy stock looks especially well positioned to profit over the coming decade, I recommend considering Vistra (NYSE: VST) as a promising stock to hold for many years.
It's the largest power producer and seller in the U.S., with nuclear, coal, natural gas, solar, and energy storage assets. It's particularly attractive to many investors because as a nonregulated utility company, it can sell power to both retail and wholesale customers at market rates.
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And those market rates are on the rise, as the rapid growth of data centers for artificial intelligence (AI) processing demands a lot of energy. Indeed, Vistra just bought Cogentrix Energy for $4.7 billion in order to address surging demand. Cogentrix brings with it 10 natural gas facilities.
Note, though, that I'm suggesting Vistra as a stock to hold over the coming decade. If you don't already own it, I'd think twice before buying, on valuation concerns. Its recent forward-looking price-to-earnings (P/E) ratio of 17, for example, is well above its five-year average of 12. And its recent price-to-sales ratio of 3.3 is way above its five-year average of 1.1.
So are you out of luck, if you had your heart set on investing in energy? Of course not. There are plenty of other energy companies with more attractive valuations. But investing in an energy-focused exchange-traded fund (ETF) may be your best bet so that you're not trying to pick just one winner. For that, consider the Vanguard Energy Index ETF (NYSEMKT: VDE).
This ETF will spread your dollars across 109 stocks, with recent top holdings being ExxonMobil and Chevron. It sports a 3.1% dividend yield, too.
If you still really want to own Vistra, though, perhaps just take a small position in it, or buy into it over time with dollar-cost averaging. Or, if you can handle the risk, just buy it, expecting to hang on for many years.
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Selena Maranjian has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Chevron. The Motley Fool has a disclosure policy.
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