Utility stocks are well off of their late April, early May highs, but that has not stopped investors from putting money to work in the sector.
XLU (SPDR Utilities Select Sector, Expense Ratio 0.18%), the largest ETF in the segment, has attracted >$300 million for instance in recent sessions despite the fund falling below its 50 day MA inside of the last two sessions.
Year to date, XLU has pulled in an impressive $1.25 billion in new assets, bringing its asset base comfortably over $6 billion. The second largest fund in the sector should also be noted, VPU (Vanguard Utilities, Expense Ratio 0.14%), as should IDU (iShares U.S. Utilities Sector, Expense Ratio 0.48%) as both funds, like XLU, tend to be involved in sector tactical rebalances or rotation activity from those ETF portfolio managers that over and under-weight sectors based on relative strength indicators among other things.
Year to date, VPU has reeled in >$100 million in new assets while IDU has taken in>$50 million. Investors have traditionally been attracted to Utility stocks as lower volatility names that have historically had attractive yields, and that still looks to be the case today as XLU’s yield for example is 3.41%.
Top holdings in XLU are DUK, NEE, D, SO, and EXC, while the top five holdings in VPU and IDU are exactly the same as XLU, just with weightings differences. For fans of non-market cap weighted indexes like the aforementioned funds, we have seen some level of growth in FXU (First Trust Utilities AlphaDEX, Expense Ratio 0.70%) which has approximately $225 million AUM currently, and this methodology like all AlphaDEX products relies on proprietary quantitative screening, and a portfolio that is equal weighted periodically.
For example, the current top holdings in FXU look nothing like the more large cap slanted XLU, VPU, and IDU, but we see names like LVLT, ETR, TDS, TED, and PNW in the top five there. Also, speaking of equal-weighting, Guggenheim offers RYU (Guggenheim S&P Equal Weight Utilities, Expense Ratio 0.50%), which has about $92 million in AUM currently.
It does not hurt the visibility of Utility stocks that they are reasonably represented in “Low Volatility” funds like SPLV (PowerShares S&P 500 Low Volatility Portfolio, Expense Ratio 0.25%) with its >25% weighting to
Utilities stocks, and to a lesser degree, USMV’s (iShares MSCI USA Minimum Volatility, Expense Ratio 0.15%) >8% weighting. Two leveraged funds in the Utility space have failed to make a huge impression thus far judging from low assets and trading volume, and they are SDP (ProShares UltraShort Utilities, Expense Ratio 0.95%) and UPW (ProShares Ultra Utilities, Expense Ratio 0.95%).
Utilities Select Sector SPDR
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