More advisors adding utilities to juice up client portfolios
Apparently more and more financial advisors are turning up the juice.
The Utilities Select Sector SPDR ETF (Ticker:XLU) has surged more than 20 percent in the past six months, far outperforming every other sector in the S&P 500 over the same period. By comparison, the Technology Select Sector SPDR ETF (Ticker: XLK) has risen 7.1 percent, while the entire SPDR S&P 500 ETF Trust (Ticker: SPY) is up 9.6 percent in the past half year.
Sure, the yield on the XLU, which owns healthy chunks of star performers NextEra Energy (Ticker: NEE) and the Southern Company (Ticker: SO), is a robust 3 percent at a time when bond yields are collapsing in hope of multiple rate cuts. But there’s more to the bullish case for power generators than a steady payout, according to Aaron Dunn, co-head of value equity at Morgan Stanley Investment Management.
“You have this inflection in power demand, whether it be data center driven or other things driving power demand in the US like EVs,” said Dunn. “For two decades, you’ve had flat power demand that was driven by the efficiency of your appliances at home. Today we have this inflection and we see a doubling of power demand increases over the next 10-plus years.”
Dunn makes the comparison to consumer staples, another traditionally defensive sector, which he calls “very challenged from pricing and volume perspective.”
“They’re defensive, but I would prefer to own something where I think we’re getting mid-single digit to upper-single digit growth in earnings and a yield that now sort of approximates the ten-year yield,” said Dunn.
Robin W. Haire, LPL Financial Advisor and president of Haire Wealth Management, says clients relate to paying their light, gas, and water bills monthly. Furthermore, they
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