Portfolio Article

n the early stages of a bull market, it doesn’t matter so much when you buy but what. The key is load up on high quality stocks that are weathering the relevant economic and sector stress test.

In investing, it’s common for good years to follow good years, and great years often follow average or poor ones. But historically great years like what we’ve just enjoyed at Conrad’s Utility Investor rarely if ever come back to back.

Only four of the 21 current Conservative Holdings trade below our maximum recommended entry point. That’s counting new addition and this month’s conservative focus stock South Jersey Industries (NYSE: SJI).

US/China trade deal optimism has gained steam this month. That’s pushed up the yield on the 10-year Treasury bond to its highest level since late July. And the result has been a mini-sector rotation out of many dividend-paying stocks.

There are about three months remaining in 2019, and much can still happen. But up to now, it’s been a quite profitable year for Conrad’s Utility Investor Portfolios.

A record two-dozen CUI Portfolio companies currently trade above my recommended entry points. That’s to be expected in an environment where investors are seeking safety and yield. And utility stocks offer the added bonus of earning most or all revenue in the US while realizing strong, reliable earnings growth from renewable energy, 5-G and other transforming technologies.

When this issue went to post, not every company in our Utility Report Card coverage universe or model portfolios had released its second quarter numbers. But there’s enough available information to discern several key takeaways.

First, even in these essential service businesses, there’s evidence the US economy has lost some steam. One place that’s shown up is industrial sales of the country’s largest electric utilities.

No stock is a buy at any price. And even the best-run company can get so expensive that realizing additional upside becomes an almost impossible slog. That’s not been the case so far this bull market for the top players in the US utility sector. But if we’re not there yet, we’re getting very close to it.

There’s nothing quite like the adrenaline rush from a big short-term gain in a stock. My son Nate enjoyed that feeling this week by picking up on a Utility Report Card recommendation of El Paso Electric (NYSE: EE). This week, the stock surged when a JP Morgan fund offered $68.50 per share in cash for the company.

After a blazing first quarter 2019, shares of best in class utilities and essential services companies have largely stalled over the past month. Not only is the Dow Jones Utility Average within a point of where it was when the April issue went to post. But all month long, it never strayed more than a couple percentage points in either direction.