Personal Finance

What Happens to Utility Stocks in a Trump Administration?

NRG Net Income (TTM) Chart

Like it or not, utility companies have been a central topic of this election season, even if they weren't often named directly. Hillary Clinton wanted to install solar panels on rooftops, a direct threat to the utility business model, and Donald Trump wants to make coal great again.

Now that Donald Trump has won and will become president early next year, what can utilities expect?

NRG Net Income (TTM) Chart

NRG Net Income (TTM) data by YCharts .

The reality that regulations could change in the future will reduce the desire to build a rush of coal plants, despite Trump's wishes. Watch to see if there are more natural gas and renewable investments made at independent power producers under Donald Trump, which will tell a lot about where the energy market is heading.

How to invest in utility stocks under President-elect Trump

As investors look at utilities heading into 2017, I think it's important to look at who will be able to generate short-term benefits from the policy changes that may take place under a Trump Administration, and also make the long-term adjustments to their businesses that will make them successful for decades to come. Trump can't stop the cost of wind and solar from falling, making them more competitive economically, which is why I see Southern Company, Duke Energy, and NRG Energy continuing to invest in these new sources of energy. But he can reduce regulations that will lead to lower costs and higher profits for NRG, Dynegy, and Calpine in the short term.

Utilities need to last through multiple administrations and many political cycles, so don't react too swiftly one way or another to utility stocks just because Donald Trump will be president. Companies need to set themselves up for the future, and that will be more important than any short-term benefit any new president may give.

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Travis Hoium has no position in any stocks mentioned. The Motley Fool owns shares of NRG Energy. Try any of our Foolish newsletter services free for 30 days . We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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