Top picks Utilities trade at 13x 1-year forward P/E, in line with historical valuations, but
we argue a discount is warranted, as 75% of the sector index is made of generators
exposed to volatile (and we think declining) commodity prices. The yield is higher than
market average but is a trap: higher EPS volatility demands higher returns, in fact. Our top
picks are Gas Natural (Buy, TP €21) and EGPW (Buy, TP €2.2). We see limited upside for
SNAM in absolute terms, but we think it will do well in relative terms (Hold, TP €4.2).