2019 has started out with a bang for utilities and essential services stocks. The Dow Jones Utility Average’s 10.2 percent first quarter return was one of its best showings in history. And the 38 stocks in our Conservative Holdings, Aggressive Holdings and Top 10 DRIPS are higher by 15 percent.
This positive momentum is certainly a welcome change from lackluster 2018, and particularly the vicious fourth quarter selloff. But it also brings reasons for investors to be wary.
First, really big openings followed by fantastic finishes are extremely rare for utilities, the most recent being in 2000. Typically, stock prices level off in the following months. I’m encouraged that our Portfolio gains were more driven by positive business developments at individual holdings than the sector surge. But with the DJUA marking a new all-time high last month, utility valuations are back in the stratosphere.
From all indications, most Utility Report Card companies should report strong first quarter earnings and guidance updates in the coming weeks. But catalysts for further upside now face a high bar. It’s also noteworthy that more than a few best in class names lagged in the first quarter, despite very strong business performance.
As I pointed out in the March 21 Income Insights “The Fed Turns a Page,” the Federal Reserve’s decision to terminate its monetary tightening cycle carries a huge positive for capital intensive companies like utilities: A big drop in borrowing costs that’s provided a fresh opportunity to lock in cheap, long-term financing. This month’s Utility Report Card comments highlight this advantage, as well as analysis of other Quality Grade criteria.
While much of the rebound in our CUI Conservative Income Portfolio and bond holdings has been due to reduced economic fears, the fact these companies have demonstrated strength in operating results has no doubt helped prices recover over the past four months.
Get big or go home: That’s the communications sector’s reality.
The result of a decision by the U.S. Court of Appeals for the Fourth Circuit in Richmond, Virginia this week puts two proposed long haul natural gas transportation projects in peril.
Despite a not-quite-ready-for-prime-time roll-out, the so-called "Green New Deal"' key goal of de-carbonization is gaining ground on both sides of the aisle in Congress, and more importantly with industry.
Unless it can successfully appeal the decision, a Manhattan federal court ruling will likely shove the wireline phone company over the edge.
Whatever happens to Berkshire Hathaway will have huge consequences not just for shareholders, but for the industries it operates in as well - including electricity.
At the end of the day, dividend stocks behave like other stocks - returns track prospects for companies’ health and growth, whether the Fed is raising rates or cutting them. That’s what to focus on, now more than ever.
Southern Company (NYSE: SO) has struggled in building America’s first new nuclear power plant since the 1980s. But CEO Tom Fanning is more confident than ever.
Bankruptcy court is fundamentally a negotiation, and this week PG&E Corp (NYSE:PCG) gained considerable leverage for its upcoming filing.
The combination of worries about the global economy in 2019 and political chaos have so far made this the worst December for the stock market in memory.
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Roger's current take and vital statistics on more than 200 essential-services stocks.