With the start of May arriving Thursday, so will chatter about selling in May and going away. Although that old adage has proven efficacious more often than not, it does not mean investors have dump all of their equity positions in favor of cash and bonds.
Investors looking to stay in equity game during the May through October time frame, the weakest six-month period for stocks, can do so with this year’s top-performing sector: Utilities. Utilities, the second-smallest sector weight in the S&P 500, have gone from being the worst performer in the benchmark index last to far and away this year’s best. [Utilities ETFs Shine in Rocky Market]
Including dividends paid, the Utilities Select Sector SPDR (NYSEArca: XLU) is 16.3% this year, more than double the returns of the Energy Select Sector SPDR (NYSEArca: XLE), the second-best of the nine sector SPDRs, and more than the triple the returns of the Health Care Select Sector SPDR (NYSEArca: XLV), the number three SPDR. [Utilities ETFs Assert Leadership]
David Kotok, chief investment officer at Cumberland Advisors, told Trang Ho of Investor’s Business Daily that he is overweight utilities names because of the sector’s reputation for being less volatile and offering strong yields. Kotok also noted utilities stocks are underowned.
XLU has a dividend yield of almost 3.6%. The iShares U.S. Utilities ETF (NYSEArca: IDU), which yields, 3.1%, has a beta of just 0.38% and three-year standard deviation of 10.7%, according to iShares data.