Opportunity Lights Up Utility ETFs

November 8th at 1:00am by Tom Lydon

Utility exchange traded funds (ETFs) are known for offering dividends and stability in times of trouble. They’re also becoming known for some solid performance, too.

According to analysts, there are some opportunities left in the utility sector. This is a sector that is known for its outperformance in bearish markets and hard utilities have always been an investor stand by for growth and income in periods of leanness. How much has the sector outperformed?

Josh Lipton for Minyanville reports that a market-capitalization-weighted group of the 34 largest fully-regulated U.S. utilities has outperformed every other sector since October 2007, with an 18% total return through September. Consumer goods, the second-best-performing sector, has produced just 7% total returns, and the S&P 500 has lost 20% during the same period. [Utility ETFs: Growth And Income In One.]

TWST reports that some trends are taking place in the sector that you might want to watch. For one, there’s some merger and acquisition activity within the utility sector that investors may want to look into. Such moves can lead to returns for companies on both sides of the deal.  [4 Utility ETFs for the Smart Grid.]

Likewise, there are a number of power plants being sold due to a distressed merchant power situation, and those companies need to get stronger, whether it’s by merging and cutting costs, or selling to a private equity group less sensitive than a publicly-traded company to near-term market moves. There are more than a dozen utility ETFs in the ETF Analyzer; go there to see them all, sort by yield, performance and more:

  • Rydex S&P Equal Weight Utilities (NYSEArca: RYU)
  • Utilities Select Sector SPDR (NYSEArca: XLU)
  • Vanguard Utilities ETF (NYSEArca: VPU)
  • iShares S&P Global Utilities Secto (NYSEArca: JXI)

Tisha Guerrero contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.