Correction in Progress: Stick to the Plan

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.

We have a lot in store for subscribers in November.

Next month’s installment of Conrad’s Utility Investor will wrap up the outcomes of the US gubernatorial and presidential elections and their implications for the utility sector. You’ll also find earnings analysis for all the companies in our Utility Report Card that have posted quarterly results.

In addition, subscribers will receive my exclusive takeaways and best investment ideas from the Edison Electric Institute’s upcoming financial conference, the premier event for utility investors.

And the next online chat for Conrad’s Utility Investor subscribers will take place at 2 p.m. ET, Nov. 17. As always, a transcript of the proceedings will be made available for those who can’t attend in person.