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Analyzing Utility Stocks' Volatility and Short Interest

PART:
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Part 2
Analyzing Utility Stocks' Volatility and Short Interest PART 2 OF 3

Utility Stocks: Analyzing Returns and Implied Volatility

Utility stocks with high implied volatilities

NRG Energy (NRG) rose 81.9% in the past year ending on February 15, 2017. It has the highest implied volatility of all the utility companies that make up the Utilities Select Sector SPDR ETF (XLU). In the past five days, NRG Energy rose 6.9%.

Utility Stocks: Analyzing Returns and Implied Volatility

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The above chart shows the one-year and last five-day returns of the stocks we identified in the previous part as having high and low implied volatilities. It shows how high volatility stocks moved sharper than low volatility stocks.

NRG Energy rose the most in the last five days, while AES (AES) was the only stock that fell. On February 13, 2017, NRG Energy announced a shakeup of its board after an agreement with hedge fund Elliott Associates and Bluescape Energy Partners. The stock rose 0.5% on the same day.

NRG Energy rose the most in the past year among the list of high implied volatility utility stocks. In the last four quarters, NRG Energy’s revenue fell 10.8%. Its operating profit margin is 9.8%.

FirstEnergy (FE) was the only loser in the past year among the high implied volatility utility stocks. In the last four quarters, its revenue rose 4.0%, while its operating profit fell 5.2%. Its operating profit margin is 17.6%.

Returns of utility stocks with low implied volatilities

Entergy (ETR) fell the most in the last five days among the list of low implied volatility utility stocks. On February 15, 2017, it announced its 4Q16 earnings results. It reported a loss in basic EPS excluding extraordinary items of $9.88.

In the next part of this series, we’ll look at the utility stocks with the highest short interest-to-equity float ratios.

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