We have seen substantial buying in Utilities ETFs to start this week off in what has been otherwise uneventful trading lately.
Three notable funds in the space that we watch as “benchmarks,” XLU (SPDR Utilities Select Sector, Expense Ratio 0.18%), IDU (iShares U.S. Utilities, Expense Ratio 0.48%), and FXU (First Trust Utilities AlphaDEX, Expense Ratio 0.70%) have seen a swell in volume as well as inflows in the $250-$400 million realm.
The largest fund in the space is XLU, with its $5.9 billion in assets under management, and the second largest fund here, VPU (Vanguard Utilities, Expense Ratio 0.14%) which has about $1.5 billion in AUM has also seen a multiple of its average volume trade recently, although we have not seen any asset flows following to note yet at this time.
IDU and FXU are the fourth largest and sixth largest “Utility Equity” ETFs in the U.S. landscape, but are rather small still compared to XLU’s asset base. Buyers have been around before in 2014 in Utilities and this is not a new phenomenon that we are reporting, as XLU for example has pulled in >$850 million now year to date.
We do however find the jolt in volume and additional buying in the sector at these levels extremely interesting, especially since the stocks are flirting with early May highs lately and, the sector continues to more than double the performance of the broad market S&P 500 year to date.
From a yield standpoint, XLU for example offers 3.44% currently which still likely looks appealing to some even given the bull rally that the sector has had since February. For those looking for potential catalysts in this sector may note that earnings season is still well away, with important reporting index components expected to release earnings in the very late July to first week of August timeframe (i.e. DUK, NEE, D, SO).