The Dow Jones Utility Average hit an all-time high this month, raising the bar of expectations to levels that will be difficult to meet, let alone beat. Investors may be in for a bit of déjà vu: The sector last reached these lofty heights in summer 2016, at which point the Dow Jones Utility Average suffered a roughly 15 percent pullback.
This correction propelled our position in ProShares UltraShort Utilities (NYSE: SDP)—an exchange-traded fund that’s designed to deliver 2 times the Dow Jones US Utilities Index’s inverse daily return—to a roughly 25 percent profit.
Over the past year, these gains have evaporated with the sector’s run-up. But with the Dow Jones Utility Average trading at historically unsustainable valuations, we’re comfortable holding a hedge position that will thrive when the sector inevitably reverts to the mean.
Will utility stocks suffer a pullback this summer? The answer depends, to a large extent, on the direction of the US stock market, which has climbed higher while shrugging off political turmoil and middling economic growth.
Most of the companies covered in our Utility Report Card will report second-quarter results in late July and early August, creating the potential for company-specific sell-offs.
The Federal Reserve’s monetary policy could also give investors an excuse to take profits; however flawed, the conventional wisdom holds that rising interest rates represent a headwind for utility stocks and other dividend-paying equities.
Of course, the market can always remain irrational for months—or even years.
Although many of our Portfolio holdings trade above our buy targets (a high-quality problem), the market isn’t bereft of opportunities—this issue highlights some of our favorite investment ideas.
That said, investors may want to consider taking a partial profit off the table in some of their highest flyers. Better buying opportunities will come again.
We revisit our basket of fixed-income securities and take profits on one bond that has rallied hard since the presidential election. We also explore the fallout from Westinghouse's bankruptcy.
Utility stocks have continued to rally, propelling a record 20 of our Portfolio holdings above our value-based buy targets--a high-quality problem. We also highlight the solid fourth-quarter results posted by a handful of our aggressive picks.
We analyze fourth-quarter results from some of the biggest companies in our model Portfolios and explain why one of our Aggressive Income Portfolio holdings surged 11 percent after reporting earnings.
Our basket of junk bonds outperformed in a challenging fourth quarter.
Does Eversource Energy's recently announced acquisition of Aquarion Water mark the start of a new trend in utility mergers and acquisitions?
Over the past 12 months, the difference between the top and bottom performers in the Alerian MLP Infrastructure Index amounted to about 60 percentage points. Capturing this upside requires on-the-ground intelligence, which is why we attend the MLPA Association's annual investor conference every year.
The growing popularity of green bonds creates opportunities for savvy investors and can help utilities to reduce their cost of capital.
ARPA-E's Energy Innovation Summit, which takes place next week, could give us early insights into President Trump's energy policies.
Could Donald Trump's support for the controversial Keystone XL and Dakota Access pipelines foment local opposition to other energy projects?
Roger's favorite utilities for investors seeking superior price appreciation by taking calculated risks.
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Warning: Falling Dividends.
Roger's current take and vital statistics on more than 200 essential-services stocks.