Income Investing

We run through the first quarter’s biggest winners and biggest losers, while revisiting the investment themes that should outperform in 2014.

After two consecutive winning months, it’s hard to believe utility stocks had so many detractors to start 2014. And it’s even more difficult to find anyone who will own up to being bearish then or now.

The Dow Jones Utility Average has lost ground in 17 of the 30 Januarys since 1984. Happily, only 5 of those declines led to a losing year. And in 13 winning Januarys, the average total return was 24.8 percent—the only losing year 1987.

Part of me wants to say, “It’s about time.”

But Moody’s decision last month to put $400 billion-plus of sector debt on review for upgrade is unabashedly welcome news for utilities.

Big picture themes always grab investing headlines. Success, however, flows from knowing what’s up with individual companies.

Regulated water utilities, for example, are on their face the very simplest and uniform of businesses. Yet so far in 2013, returns from the 10 companies I track in the Utility Report Card have ranged from a 26 percent gain to barely breaking even.

Stepped up targeting of dividend-paying stocks, runaway momentum widening the gap between loved and unloved stocks, and shifting odds of recovery in essential service company investment: These three trends have increasingly shaped returns since spring. And odds are good they’ll continue to the rest of the year.