Now this isn't my title...so don't blame me...it was a hook on CNBC today to get us to tune in after the commercial break. The concept was that utility companies are safe investments and their stock prices have been rising while technology companies (primarily semiconductor companies) are dropping in value. Of course, after the commercials they had the 'expert' on that said she owns utility companies that they were safe, they are her whole life blah blah blah and well you know...she loves them. Then there was the other 'expert' who also loves them but only the ones that go up in value. Truely a valuable spot.
Now why is this of interest? The idea for this, aside from filling airtime, is that CNBC has actually identified something that is true. Traditional utilities do not move up and down in price as much as the market. They really are more correlated to interest rates as they are regulated and pay a dividend. That dividend may go up but generally its only when the government allows them to charge more. (Although not a fan of regulated industries utilities may be a good alternative or adjunct to your fixed income investments). Now this isn't why they were covering it but it is interesting. Doing a little background research pointed me in the right direction. What I found is below:
Source: Bloomberg
Total Returns as of December 3, 2021
Past performance is no guarantee of future results
This chart clearly lays out what the CNBC 'experts' did not. First, the time frame for out performance of utilities is less than a month and two, that if you have a time frame of over one week, and you should, relying on the TV to direct your investments is a bad idea, Instead, if you are an investor, look into our e3 model. Empower, Enhance and Elevate. Set a plan and if your plan is well constructed and implemented you don't have to worry about how your portfolio did each week. Talk with us about how we take the risk out of investing with e3...you really can both sexy and safe.
(Of note, the ishare semi-index ETF, symbol SOXX, has appreciated 27.96 on average for the last ten years. Their utility ETF, IDU, has appreciated 10.01 on average. Thanks to First Trust Advisors for their help with the performance numbers)