Roger S. Conrad

When the risk-off trade inevitably comes back in vogue, expect this defensive master limited partnership to benefit from the flight to quality.

We review the recent mergers and acquisitions news in our coverage universe, including a flurry of deal closures and the sale of the former TXU Corp, now called Oncor.

The Brexit-driven selloff hasn't changed our mind on UK-based utility stocks, but it has created an opportunity for aggressive investors to buy this Spanish telecom.

Eighteen of the holdings in our model Portfolios trade above our value-based buy targets, while several have reached levels where investors should consider taking some of their profits off the table.

Roger Conrad will host an exclusive Live Chat for Conrad's Utility Investor subscribers on July 19, 2016, at 2:00 p.m.

The upcoming election season is heating up, but overheated valuations are a bigger concern for investors in utility stocks.

Our basket of fixed-income securities has done well, thanks to the rally in bond prices.

The recent rally in energy stocks gives us an opportunity to exit two of the riskier names in our model Portfolios.

The Dow Jones Utilities Average finished the week at a record high and the index’s price-to-earnings ratio has blown out to levels last seen in early 2008. Although this froth in the market increases the bar of expectations for utility stocks and heightens the risk of a pullback, our favorite utilities enjoy ready access to low-cost capital and ample opportunity to grow their rate base through investments in renewable energy, pipelines and gas-fired power plants. The recent momentum driving utility stocks higher reflects concerns about the US economy and the market’s growing realization that the Federal Reserve will struggle to raise interest rates this year. In this environment, investors gravitate toward utilities’ resilient cash flow and above-average dividend yields. Whereas reliable earnings are enduring features of regulated utilities, the influx of capital driving these stocks to new highs rests on something far more fickle: investor sentiment. When momentum investors find an excuse to take profits off the table, the sector will take a hit, regardless of underlying fundamentals. In this environment, investors should take advantage of the rally to exit riskier names, take some profits off the table in their winners (14 Portfolio holdings trade above our buy targets) and assemble a shopping list of stocks to buy when the inevitable pullback occurs.

Momentum has carried utility stocks to historically high valuations, limiting the number of attractive buying opportunities. Master limited partnerships have also rallied hard from their nadir in February, but stock selection will become increasingly important going forward.