Utilities Sector 3Q18: Best and Worst

David Trainer  |


The Utilities sector ranks sixth out of the 11 sectors as detailed in our 3Q18 Sector Ratings for ETFs and Mutual Funds report. Last quarter, the Utilities sector ranked sixth. It gets our Neutral rating, which is based on an aggregation of ratings of the 70 stocks in the Utilities secto. See a recap of our 2Q18 Sector Ratings here.

Figures 1 and 2 show the five best and worst rated ETFs and mutual funds in the sector. Not all Utilities sector ETFs and mutual funds are created the same. The number of holdings varies widely (from 15 to 235). This variation creates drastically different investment implications and, therefore, ratings.

Investors seeking exposure to the Utilities sector should buy one of the Attractive-or-better rated ETFs or mutual funds from Figures 1 and 2.

Our Robo-Analyst technology[1] empowers our unique ETF and mutual fund rating methodology, which leverages our rigorous analysis of each fund’s holdings.[2] We think advisors and investors focused on prudent investment decisions should include analysis of fund holdings in their research process for ETFs and mutual funds.

Figure 1: ETFs with the Best & Worst Ratings - Top 5

* Best ETFs exclude ETFs with TNAs less than $100 million for inadequate liquidity.

Sources: New Constructs, LLC and company filings

UTLF is excluded from Figure 1 because its total net assets (TNA) are below $100 million and do not meet our liquidity minimums.

Figure 2: Mutual Funds with the Best & Worst Ratings

* Best mutual funds exclude funds with TNAs less than $100 million for inadequate liquidity.

Sources: New Constructs, LLC and company filings

FUTY is the top-rated Utilities ETF and BULIX is the top-rated Utilities mutual fund. FUTY earns a Neutral rating and BULIX earns an Attractive rating.

PSCU is the worst rated Utilities ETF and ICTVX is the worst Utilities mutual fund. They both earn a Very Unattractive rating.

70 stocks of the 2850+ we cover are classified as Utilities stocks.

The Danger Within

Buying a fund without analyzing its holdings is like buying a stock without analyzing its business and finances. Put another way, research on fund holdings is necessary due diligence because a fund’s performance is only as good as its holdings’ performance. Don’t just take our word for it, see what Barron’s says on this matter.

PERFORMANCE OF HOLDINGs = PERFORMANCE OF FUND

Analyzing each holding within funds is no small task. Our Robo-Analyst technology enables us to perform this diligence with scale and provide the research needed to fulfill the fiduciary duty of care. More of the biggest names in the financial industry (see At BlackRock, Machines Are Rising Over Managers to Pick Stocks) are now embracing technology to leverage machines in the investment research process. Technology may be the only solution to the dual mandate for research: cut costs and fulfill the fiduciary duty of care. Investors, clients, advisors and analysts deserve the latest in technology to get the diligence required to make prudent investment decisions.

Figures 3 and 4 show the rating landscape of all Utilities ETFs and mutual funds.

Figure 3: Separating the Best ETFs From the Worst ETFs

Sources: New Constructs, LLC and company filings

Figure 4: Separating the Best Mutual Funds from the Worst Mutual Funds

Sources: New Constructs, LLC and company filings

This article originally published on July 17, 2018.

Disclosure: David Trainer, Peter Apockotos, and Kyle Guske receive no compensation to write about any specific stock, sector or theme.

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[1] Harvard Business School features the powerful impact of our research automation technology in the case New Constructs: Disrupting Fundamental Analysis with Robo-Analysts.

[2] Ernst & Young’s recent white paper "Getting ROIC Right" proves the superiority of our holdings research and analytics.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
PUI Invesco DWA Utilities Momentum ETF 28.68 -0.63 -2.15 9,956 Trade
FUTY Fidelity MSCI Utilities Index 35.12 -0.74 -2.06 158,321
FXU First Trust Utilities AlphaDEX Fund 27.65 -0.49 -1.75 38,696
IDU iShares U.S. Utilities 135.08 -2.94 -2.13 27,638
JHMU John Hancock Multifactor Utilities 28.39 -0.58 -2.01 27,912
VPU Vanguard Utilities 118.76 -2.66 -2.19 136,767
XLU SPDR Select Sector Fund - Utilities 53.20 -1.18 -2.17 25,509,951

Comments

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