The Dow Jones Utilities Average returned 30.7 percent in 2014—the index’s best showing since 2000. Telecoms, energy and most international stocks posted far less impressive results.
The Jan. 5 Utility Roundup included results for each of the 43 companies that graced our Portfolios in 2014. Returns range from a 20 percent paper loss in MDU Resources (NYSE: MDU) to an average gain of almost 50 percent on six positions we sold during the year.
A year ago, conventional wisdom assumed that regulated utility stocks would get whacked by the Federal Reserve raising interest rates and lost sales to SolarCity Corp (NSDQ: SCTY) and other proponents of distributed solar power.
This expectation enabled us to pick up some of our biggest winners last year on the cheap.
Utility stocks find themselves in vogue this year. Exelon Corp (NYSE: EXC), for example, gained more than 40 percent in 2014 and now garners seven buy ratings from Wall Street analysts—up from zero at the year’s outset. But with the Dow Jones Utilities Average trading at almost 19 times earnings, good values are hard to find.
Against this backdrop, the Utility Report Card includes more Hold and Sell ratings than at any other time since 2009.
Bottom Line: In this late-stage bull market, it’s more critical than ever to stick to stocks that trade below our buy targets to avoid overpaying or taking on too much downside risk.
Fortunately, savvy investors can load up on bargains in other essential-services industries…
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Smart investing. Taking advantage of real opportunities and not fads (and knowing the difference). Finding the companies and stocks that will deliver for the long haul, so investing lets you live instead of investing turning into your life. Roger Conrad has dedicated his career to these principles—and that’s what Conrad's Utility Investor delivers.
Roger's favorite utilities for investors seeking superior price appreciation by taking calculated risks.
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Roger's current take and vital statistics on more than 200 essential-services stocks.