A recent increase in equity market volatility is benefiting some traditionally defensive sectors, including utilities. Those benefits are being accrued by some sector exchange traded funds using fundamental or smart beta weighting methodologies, including the Invesco DWA Utilities Momentum Portfolio (NASDAQ: PUI).
The Invesco DWA Utilities Momentum Portfolio, which is up nearly 4% this month, was one of just two ETFs hitting record highs on Friday.
The utilities sector was suppose to be a throw away investment as many anticipated a strong economy with a full labor market to push up interest rates, which traditionally weighed on the bond-like utilities stocks.
However, with inflation relatively under control and benchmark Treasury yields still stuck around 3%, utilities remain attractive for yield hunters. Moreover, after the recent bout of volatility, investors are still still looking at the bond-esque sector as a safe way to remain the game and generate some extra dividends on the side.
Inside PUI ETF
PUI recently turned 13 years old and holds 31 stocks. The fund targets the DWA Utilities Technical Leaders Index.
That index “is designed to identify companies that are showing relative strength (momentum), and is composed of at least 30 securities from the NASDAQ US Benchmark Index. Relative strength is the measurement of a security’s performance in a given universe over time as compared to the performance of all other securities in that universe,” according to Invesco.
Recently, Morgan Stanley has upgraded the utilities sector to Outperform, arguing that stock prices aren’t keeping pace with earnings growth so far in 2018, which suggests the market participants may be subtly pricing in slowing earnings growth down the line.
Over three-quarters of PUI’s holdings are considered value stocks and none of the ETF’s holdings command more than 4.12% of its weight.
PUI charges 0.60% per year, or $60 on a $10,000 investment.
For more information on the utilities sector, visit our utilities category.