Since the beginning of May, 80 percent of the companies in our model Portfolios have hit 52-week highs. And the rest are a good day’s trading from this achievement. Our Aggressive Income Portfolio has delivered an average return of 27.5 percent since its inception, roughly doubling the 13.7 percent gain posted by the Dow Jones Utilities Average over equivalent holding periods. Meanwhile, the picks in our Conservative Income Portfolio have generated an average return of 13.4 percent, slightly lagging the benchmark index’s 14 percent gain.
But new risks have emerged that bear monitoring. A growing focus on allowance for funds used during construction (AFDUC) has identified some utilities that may be at risk of potential write-downs. Meanwhile, others find themselves in the crosshairs of the Obama administration’s aggressive environmental policies.
The greatest danger to most of the 207 stocks in my Utility Report Card comes when investors’ expectations rise along with prices. That’s why it’s critical to stick with my buy targets, which are based on long-run value—not near-term momentum.
Be patient when a stock you want to buy moves above my buy target. I will raise those targets when potential returns rise and risks diminish. Until then, focus your firepower on the stocks highlighted in this issue.
Rarely will you find a sector’s top-quality stocks on sale more than five years into a bull market. But that’s the case with this new Conservative Income Portfolio holding. Record demand has enabled this utility to grow its first-quarter earnings by 19.7 percent year over year.
A growing, capital-intensive business must regularly be fed with sales of debt and equity. Investors almost invariably fear such offerings as either dilutive or incurring more debt. But the lowest corporate borrowing rates in a generation have enabled companies to cut interest expenses with new debt offerings, eliminating their near-term exposure to rising rates. This week, we look at six Conrad's Utility Investor Portfolio holdings that have had recent offerings.
Roger's favorite utilities for investors seeking superior price appreciation by taking calculated risks.
Harness the tried and true wealth-building power of rising dividends.
Nothing compounds wealth like reinvesting a rising stream of dividends.
Warning: Falling Dividends.
Roger's current take and vital statistics on more than 200 essential-services stocks.