Public utilities offer value, profit and reliability when the market is at its worst, and so can the exchange traded funds (ETFs) that track them.
However, Del Thiessen for Seeking Alpha cautions that they’re not immune from downturns, even though they are less likely to suffer a precipitous drop when times are bad. In fact, he says, utility ETFs have several advantages over single stocks: diverse holdings, relatively low risk and they generate dividends.
- PowerShares Dynamic Utilities (PUI), down 7% year-to-date
- iShares S&P Global Utilities (JXI), down 8.4% year-to-date
- Vanguard Utilities ETF (VPU), down 6.9% year-to-date
- Utilities Select Sector SPDR (XLU), down 6.5% year-to-date
All but PUI remain above their trend line (200-day moving average).
While the sector, overall, has suffered losses along with nearly everyone else in recent weeks, The Wall Street Journal gathered data for sector losses between Oct. 9, 2007 and Jan. 23, 2008. The numbers showed that utilities suffered the fewest losses in the declining market:
Chart courtesy of the Wall Street Journal.