The utilities sector is facing risks from pending legislation on clean technology and from higher interest rates. And gas utility operators saw their earnings slump in the previous quarter. In addition, studies show that betting on fundamentally weak stocks mentioned on the WallStreetBets forum has resulted in losses for investors. Hence, we think fundamentally weak utility stocks that have been mentioned frequently on the forum, Eversource (ES) and Archaea (LFG), might be best avoided. Read on.The utilities sector faces uncertainty regarding the potential clean-energy legislative funding and higher interest rates due to an unprecedented rise in inflation. Furthermore, gas utility companies experienced an earnings slump year-over-year in the third quarter.
Earlier this year, the power of social media in stock market trading was tested when the discourse on the Reddit forum, r/WallStreetBets, drove selected stocks to a short-squeeze situation. However, the shares’ price gains could not be sustained because of the companies’ weak fundamentals. In addition, a capital.com study has found that investing in stocks mentioned on the platform resulted in losses half the time, and the losses worsened over time as investors held on to foundering stocks.
Therefore, we think utility stocks mentioned frequently on the WallStreetBets forum over the past 24 hours, Eversource Energy (NYSE:ES) and Archaea Energy Inc. (LFG), might be best avoided, given their weak fundamentals.