Exactly half of our portfolio stocks posted positive total returns in 2022 and half negative. That matches up pretty well with the mostly neutral returns posted by our Aggressive Holdings (up 3.5 percent), Conservative Holdings (up 1.3 percent) and Top 10 DRIPs (up 9.5 percent). It’s also right there with the Dow Jones Utility Average’s 2.08 percent total return for the year. But the overall numbers do mask some pretty massive divergence among individual holdings. The biggest is the 156.5 percentage point difference in performance between our best stock Constellation Energy (NYSE: CEG) and our worst Algonquin Power & Utilities (TSX: AQN, NYSE: AQN).
Even if the stock and bond markets manage a year-end rally of historic proportions, 2022 will go down as one of the more challenging for investors in memory. But with basically three weeks left in the year, the Dow Jones Utility Average is still very much in the black.
When the October issue of CUI posted, the Dow Jones Utility Average was underwater nearly -10 percent for the year. Now it’s close to even including dividends. That strong recovery also shows up in a brief scan of stock prices in this month’s Conservative Holdings, Aggressive Holdings and Top 10 DRIP tables. But it wasn’t exactly a buy everything moment either.
The Dow Jones Utility Average has surged by roughly 150 points since mid-June. That’s a rally not a lot of people expected. And a good bit of the move followed something probably even fewer were looking for: The grand bargain between Senator Joe Manchin (D-WVA) and the White House that became the still-evolving “Inflation Reduction Act of 2022.”
First, let’s look at the record. For the first six months of 2022, the Conservative Holdings returned an average of 4.3 percent. The Aggressive Holdings were up 0.44 percent. And the Top 10 DRIPs—which feature a fair amount of overlap with the Conservative Holdings—were ahead by 5.31 percent.
Is this a bear market rally, or the start of another leg of the bull market that started in March 2009? How you answer that question will probably depend on what stocks you currently own.
Last month, I highlighted five key drivers of the Dow Jones Utility Average’s early 2022 rally past the long-elusive 1,000 mark. Unfortunately, over the past month of so two major negatives have put a lid on upside. One is inflation pressure that’s up-ended the broad stock market, while accelerating the bond market’s decline.
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