Voracious AI and a Groaning Grid Will Power These Three Energy Plays

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The first energy stock I ever bought was also the first stock I ever bought — a utility called Southern Co. $SO ( ▼ 0.79% ) .

I still own some Southern shares.

The next energy stock I bought was Exxon Mobil Corp. $XOM ( ▼ 2.44% ) (when it was still just Exxon).

And it’s an interesting story.

It was back in the middle of the 1990s. I was still working as a business reporter, and my paper sent me out to Las Vegas to cover a big industry event. My folks had a Vegas trip planned, too — and when I said I was heading out there myself, they changed their plans so we could spend time together.

Once I filed my last story on Friday afternoon, I was free to roam. The three of us had some great meals. We saw a show. My Dad and I toured the car museum.

And while I’m just not a gambler (one reason I tell folks to be Nancy Reagan-esque and “just say no” to speculative options), we did hit the casinos. Mostly slots. A bit of roulette. And even craps.

I remember how my Dad — a really good guy and the quintessential engineer — turned to me and said: “Okay Willy, I’m going to show you how to play craps … we’re only going to play the ‘pass line’ [to keep it simple and keep risk low] … and it’ll be fun.”

As it turns out, it was fun. And, ultimately, profitable — in a true Wealth Builder sense of the word.

I ended up winning several hundred bucks and decided to quit while I was ahead — a decision made easier by my approaching departure time.

I pocketed the cash, hopped the jet back to Rochester, and, early the next week, used my “ill-gotten gains” to buy Exxon.

Call it “Bill’s Foray into Casino Capitalism.”

It reinforced a lesson — or, more specifically, a core belief of mine: I don’t mind taking risks, but while I’m comfortable with the risks I take investing in stocks, I feel downright hinky about the risks associated with speculation and gambling (actually one and the same).

Granted, when talking about “risk,” Exxon is kinda boring. But I kept the stock through the years. I reinvested the dividends. I Accumulated more on pullbacks.

I wish I’d bought more. Maybe even a lot more.

But that’s okay: I’ve got yet another chance.

And so do you.

Energy is a big Wealth Builder opportunity. Bigger than ever.

In addition to biotech, we’ll be adding some energy stocks to the Stock Picker’s Corner Model Portfolio very soon — and possibly the Special Situation Portfolio, too. (We’re researching some companies — even as you read this.)

We’ll spend our time together here today talking about a few of the companies we’ve talked about — to give you a head start on your own research.

Energy Stock No. 1: GE Vernova

Thirty years later, after my foray into “Casino Capitalism,” the energy sector is more alluring than ever. There are ways to invest in energy that weren’t even on the drawing board when I bought my “boring” Exxon shares.

Indeed, the sector itself isn’t as “boring.”

We believe that “if you find the best storylines, you’ll find the best stocks.” And one of those “best” storylines today is the Artificial Intelligence Era — a paradigm shift that’s creating a voracious appetite for energy, generating demand that’s hyper-stressing an already-groaning American power grid.

That’s created an interesting “back to the past” dynamic in the energy business.

I mentioned my Dad, William Patalon Jr., who aided my casino foray. We’re talking about a guy whose career lasted more than 50 years. Most of that span was in the defense/aerospace sector. But he also spent time with Westinghouse Electric Co.’s commercial-nuclear business near Pittsburgh. (The company’s old “atom smasher” still sits on a vacant lot near where he worked.)

Dad worked for the commercial nuclear business from the late 1960s to the early 1970s — when we moved from Pittsburgh to Baltimore because he moved into Westinghouse’s defense-focused electronic-systems unit.

Turns out it was a shrewd move (as most of his moves proved to be). America’s “commercial nuke” biz got bogged down in protests, regulatory red tape, cost overruns and shifting energy costs.

Sentiment turned harsh — and the Three Mile Island nuclear accident was the “kill shot” that ended it all.

(In one of those odd bits of synchronicity, the alarmist anti-nuke flick The China Syndrome – which warns of a plant meltdown — debuted in theaters on March 16, 1979. The real TMI accident occurred 12 days later.)

As we detailed here, the AI Era has ignited new demand for modular reactors.

Back when my Dad worked in the nuke business, there were two big U.S. players in the commercial-reactor business: Westinghouse and General Electric Co.

The Westinghouse unit is now part of another company.

In 2007, GE combined its business with Hitachi of Japan. Parts of that GE stake (I’ll spare you all the corporate dance steps that got us here) are now part of GE Vernova Inc. $GEV ( ▼ 0.51% ) , formed in early 2024 by the merger and subsequent spinoffs of General Electric’s energy businesses.

GE Vernova is the first company we’ll focus on today.

SPC Publisher Jack Delaney first told you folks about GE back in September 2024 to put it on your radars. The shares were trading at $251.53 and have surged 225% in about 17 months to $816. I followed that up with a detailed report on GE a month later.

It’s now a $222 billion (market value) global unit that operates in the power, wind and electrification sectors. The first and the last are relevant to our talk here today.

The power unit works on gas, hydro, steam and nuclear power technologies. Electrification focuses on getting electricity from the power plant to the user. And it also focuses on power “storage” — an important opportunity going forward.

GE Vernova CEO Scott Strazik told The Wall Street Journal what I told you in that last report — that nuclear power is a viable energy source, but one that will take time to build out.

“I do think in the early 2030s this will start to scale,” he told the newspaper. “We’re going to be adding gigawatts upon gigawatts of nuclear capacity every year. So it’s going to take this decade to really validate the technology, get a few of the first projects cut into COD, or commercial operation date. And I’m highly confident in the 2030s this is going to be a very material part of the equation for us.”

Now, just because Strazik talks about “the early 2030s,” that doesn’t mean the company does no business until then. Its work with the grid will be crucial. New power plants and new data centers will be built over time, meaning there will be revenue all along the way. And GE Vernova’s breadth of business — and its global reach (only 30% of its business is U.S.-based) — work in its favor.

Indeed, Raymond James Managing Director Pavel Molchanov referred to it as a power-industry “supermarket” that markets electricity-generating natural-gas turbines, services and modernizes power grids and even makes and sells wind turbines.

“This company does everything,” he told Yahoo! Finance. “Because of the buildout of electric-power infrastructure is an all-of-the-above story, that means all these solutions are going to be needed.”

If you want tangible proof, check out this newest development.

GE Vernova’s gas-turbine-equipment business is booming — with an end-of-2025 backlog of $150 billion — so much that data-center customers are agreeing to “slot reservation agreements,” or SRAs, where they pay an upfront fee to lock in future deliveries of that specialized gear.

Energy Stock No. 2: Southern Co.

When it comes to nuclear power and AI, The Southern Co. is an obvious candidate for Wealth Builders.

As mentioned earlier, it’s a company I know well. In fact, coming out of the Crash of ’87, this was the first stock I ever bought. And I still own some of it.

The Atlanta-based utility serves customers in Alabama, Florida, its home market of Georgia and Mississippi. And it plays into some of the longer-term storylines — like renewables — that will only get stronger.

More than half its power-generation — about 54% — stems from natural gas. But from that same power generation standpoint, Southern is actually an interesting “proxy” for U.S. nuclear energy: About 18% of the electricity Southern generates stems from nuclear — which is pretty much in line with the U.S. Energy Information Administration’s 18.6% estimate for all of America.

Here’s a breakdown of Southern’s power-generation sources:

The utility’s nuclear capacity will only increase.

Units No. 3 and No. 4 of Southern’s Vogtle nuclear business finally went live a few years back. Not only was that the first completion of a U.S. nuclear plant in decades; Vogtle is now the biggest nuclear plant clean energy site here in America, said Zacks Investment Research.

At a recent price of $92.56, the stock is down from its 52-week high of $100.84. The last dividend increase elevated the yearly payout from $2.88 to $2.96 a share — meaning the current yield is a very decent 3.26%.

Southern has now boosted its payout for 25 years in a row. AI demand will keep revving up earnings: When it reports fourth-quarter results on Feb. 19, analysts are looking for a top-line increase of 8.3% and a profit jump of 12%.

Now, I will say that Southern’s valuation — a P/E of more than 22 — is above its historical norm.

That means you can wait for a pullback … buy now with a super-long-term time frame … or embrace my “Accumulate”strategy, where you buy some here — and add to it on pullbacks or as you get extra cash.

Energy Stock No. 3: Hallador Energy Co.

Hallador Energy Inc. $HNRG ( ▼ 2.34% ) was a free bonus pick, and it’s been a big winner for you.

Back in 2024, I made it part of my “Five Stocks in Five Minutes” report — a list of five companies you could look to buy on pullbacks.

I told you all to grab Hallador if its shares dropped below $6 — which they eventually did. From $5.98, Hallador shares shot up as high as $24.70 (a 313% windfall).

When we endured that historic, two-day ($6.6 trillion) wipeout in April of last year — and Hallador fell back into the $11 realm — I bought some myself.

The stock has since dropped back and now trades at $19.30.

Hallador is based in Terre Haute, Ind. (a city that’s been on my radar ever since it was named over and over in the Season 7 Law & Order episode “I.D.”).

The company’s name is a Spanish term for “one who leads the way,” and it’s been involved in the energy markets since 1951. It started out as an oil-and-gas explorer, evolved into a coal firm and is undergoing another makeover — shifting this time into renewables and actual power production.

I’m intentionally oversimplifying this, but call it “a utility in the making.” (And, no, I don’t know the Spanish term for that.)

As part of a push to reduce overall debt, Hallador recently cleaned up its balance sheet by converting some convertible debt to stock. It posted a first-quarter loss of $1.7 million — and conceded that the 816,000 megawatt-hours of power it generated fell short of its 1.5 million target — but also noted that revenue from its electricity operations surpassed those from coal for the first time.

With a market value of about $910 million, this is definitely a small-cap play. With a pullback, it could be playing “micro-cap limbo” — dancing under the $300 million micro/nano threshold.

And I’d label the risk level as high.

Hallador rates as a “special situation” in my book because of a “six-pack” of factors:

1. It’s changing its business model.

2. Dealmaking could accelerate that transformation.

3. The shift away from “carbon” fuels won’t be as quick or as easy as most folks think.

4. We have the chance to do this before retail investors catch on.

5. It’ll be aided in the near term by falling interest rates, and;

6. It’ll be aided in the long-term by rising energy demand.

Indeed, on that last point, the U.S. Energy Information Administration (EIA) says global electricity demand could surge by 33% to 75% by 2050, when as much as two-thirds of the world’s electricity production could come from nuclear and renewables. Both the “stickiness” of carbon fuels (check out our report on coal here) and the shift toward renewables will benefit Hallador.

We’re looking at some other energy stocks, too

We’ll have several “official” new Model Portfolio members very soon — and SPC Premium members get the best of our research.

As you see here, our free research is pretty doggone great, too.

Be sure to watch for our newest stuff.

See you next time;