Roger S. Conrad

For just the 18th time since the last World War, the S&P 500 Utilities Index has suffered a pullback of more than 10 percent from its previous high. Excluding dividends, these past swoons have averaged a 23 percent decline over a period of about 14 months. Our base case calls for further weakness in utility stocks, as the risk-reward balance remains skewed to the downside. Over the past several months, we’ve systematically reduced our exposure to names we wouldn’t feel comfortable holding in an economic downturn and taken partial profits on some of our big winners—many of which have pulled back 15 percent to 20 percent since early July. At the same time, our position in ProShares UltraShort Utilities (NYSE: SDP), an exchange-traded fund designed to deliver two times the Dow Jones US Utilities Index’s inverse daily performance, has gained about 18 percent since early July. We’ve also assembled a shopping list with dream prices for our favorite stocks. Although we remain committed to buying and holding high-quality stocks for the long haul, our recent moves have positioned us to profit from whatever lies ahead.  

This company's operating results have been a portrait of consistency despite the volatility in its stock price.

With utility stocks down more than 10 percent since early July, our approach of high-grading the model Portfolios, taking partial profits on overextended names and betting on a pullback has paid off. We weigh the scenarios that could emerge in coming months and revisit our investment strategy.

We weren't surprised when Ferrellgas Partners LP (NYSE: FGP) announced that the master limited partnership may need to cut its distribution by 50 percent.

The investment strategy we’ve pursued over the past several months has paid off thus far. And after the recent pullback in utility stocks, two of our longtime favorites once again trade below our value-based buy targets.

Shares of our favorite water utility have finally pulled back to a reasonable valuation.

This company's operating results have been a portrait of consistency despite the volatility in its stock price.

With some of the Conrad's Utility Investor team in the direct path of Hurricane Matthew, the October issue may be delayed.

Roger Conrad will host an exclusive Live Chat for Conrad's Utility Investor subscribers on Nov. 17, 2016, at 3:00 p.m.

We add three bonds to our basket of fixed-income securities.