Timothy Winter, CFA, is a portfolio manager of The Gabelli Utilities Fund, The Gabelli Utilities Trust, The Gabelli Global Utility & Income Trust, and the Love Our People and Planet ETF and a research analyst covering the utilities industry for GAMCO Investors, Inc.
He joined Gabelli Funds in 2009 and has over 25 years of industry experience.
Previously he served over 15 years as research analyst covering utilities at AG Edwards, as well as Jesup & Lamont and SM Research.
Mr. Winter has received numerous awards and recognition for his work in the industry. He was a three-time All-Star Wall Street Journal winner and five time ranked number-one Electric Utility Team by Institutional Investor.
In 2018 he received Thomson Reuter’s U.S. Analyst Award and was ranked the number-one stock picker in the electric utility sector and water utility sector and number two in the gas utility sector.
Mr. Winter holds a B.A. in economics from Rollins College and an MBA in finance from Notre Dame. The Gabelli Funds portfolio manager is a CFA charterholder.
“The utility sector includes renewable power and storage developers, wind, solar, utility scale batteries and so on. Utilities are actively involved in the research and development for new technologies and improving existing technologies like hydrogen and carbon capture.
I’ve covered the sector for 30 years. And the utility funds are obviously focused on utility stocks. Love Our People and Planet is 30% to 40% focused on the E part of ESG, where a lot of that has to do with clean energy and with all elements of saving our planet.”
The Gabelli Funds manager has developed “a deep understanding of the major macro and micro themes in the environment and a deep understanding of how these themes impact the sector and each individual business model.
So for example, the biggest issues or themes of our time are decarbonization and the current energy crisis.
To pick winners, one must understand how returns, earnings and cash flow of the various different players in the energy ecosystem are impacted in the environment.
With utilities specifically, they earn returns when the state regulators recognize their investment and set rates to allow a return on the investment.
We try to have a good understanding of the regulatory environment of the various states and countries. We also want to have a grasp of the political environments, service area economies and management motives.
And then, we dig deeper down into the various groups, subgroups and players and forecast earnings, cash flows and risk profiles.
We then compare the valuations which suggest whether we should be buying, selling or holding. We go top down to identify big themes and then bottom up to ensure we identify those we think will be winners.”
This long term view guides Gabelli Funds portfolio manager:
“In the bigger picture, successful long-term investment requires consistent long-term energy policy.
In Germany, for instance, because of Fukushima, they’ve eliminated nuclear.
Because of climate change, they’ve eliminated coal.
Because they don’t have the fracking ability and the abundant natural gas reserves that are available in the U.S., they have grown more dependent on renewable power and energy imports.
Renewable power is the future, but wind and solar cannot run as baseload power or 24/7, and battery storage is not fully developed.
Germany and parts of Europe are experiencing shortages and high prices.
This energy crisis has been building for several years but was put on hold by the economic shutdowns and really reached crisis proportions in the fall of 2021, when Europe started to see real shortages and prices going through the roof.
The situation has been made even worse by the Ukraine invasion.
So yes, the very policies and desire to eliminate fossil fuels are leading to the unintended consequence and need to use more fossil fuels.
Is it a long-term trend? I would say, no.
And that’s why I just called it a double-edged sword that we have this near-term issue — near term meaning three to five years, perhaps — as there’s a massive push towards investing in clean energy. And, yes, it’s impacting my companies in the U.S. and in North America.
This is one of the reasons why we like the electric utility sector and the gas utility sector as plays in investing in clean energy in the decarbonization of the world.
Because they have a diversity of fuel sources, and understand the need for affordability and reliability, and are methodical and careful in where and how they invest capital.
As gas prices in North America and the United States go from $3 per MMBtu to $8 or $9 per MMBtu, it is causing concerns and issues.
It shines the spotlight on the lack of investment in natural gas infrastructure and the pipelines that have been canceled.
Companies have been discouraged to invest because they don’t know if they will be allowed to earn the returns going forward. Again, wind and solar are great and the economics and reliability are improving, but they’re not ready to run all the time, and battery storage is not to the point where we can make this dramatic shift as a country to 100% renewables.
So there has to be a transition.
And so, the back and forth, which is the hallmark of the United States, does allow for the debate in energy policy.
Utilities benefit even during the back and forth of the pendulum shifts because they earn returns investing in energy infrastructure.”
The Gabelli Funds portfolio manager has a job to back his theory with his investor’s money:
“The first name to highlight is NextEra Energy (NYSE:NEE).
They are the biggest electric utility in the world: $150 billion of equity cap, $210 billion of enterprise value.
They are also by far the leading and largest renewable energy developer in the world, and specifically, they’re focused on North America. And 60% of their earnings do come from regulated business in Florida, Florida Power & Light, which benefits from customer growth and solid regulation and a healthy rate plan for the next four years.
NEE management outlined the tremendous opportunity and capital needs for U.S. decarbonization and clean energy by 2050.
The numbers are staggering.
Currently, the U.S. has 1,100 gigawatts of power generation including coal and nuclear, natural gas, wind, solar and hydro.
The U.S. needs 7,000 gigawatts of renewable energy to decarbonize the U.S. economy by 2050, including 3,500 gigawatts from the power sector.
And so, as they’re the leading developer of wind, solar and battery storage, and they’re also investing in hydrogen, NEE is hands down the leading player with 50% market share of wind development and going to participate in this huge megatrend.
So that’s the number-one company.
NEE also owns 58% of NextEra Energy Partners (NYSE:NEP) which is also a renewable company.
They own wind, solar and some natural gas pipelines that are unique from NextEra Energy. And it’s a dividend play.
NEP grows the dividend 12% to 15% per year and acquires renewable projects from NextEra Energy and/or from other entities, or develops its own renewable projects.
So those would be the one and two on my list for sure.”
Get the complete interview in the Wall Street Transcript.
Timothy Winter, CFA, Portfolio Manager, GAMCO Investors, Inc.