Beyond gold and commodities, I can’t imagine a more beaten-down sector.
The XLU counts Duke Power (DUK), Southern (SO) and Dominion (D) among its biggest holdings; all three have dividend yields of 4%-percent, but only Dominion is even posting a positive return over the past six months. XLU also has Exelon (EXC) as a top-five weighting — EXC cut its dividend in February, and earnings are on the way down.
In fact, analyst estimates for many of XLU’s top holdings show little hope for earnings growth. Meanwhile, the sector is still hampered by high costs, stagnant revenues and shrinking margins.
Utility bulls are few and far between. Louis Navellier just ripped the sector, and even I made a case back in late May that it had so many issues — including lower prices for electricity, higher operating costs for both electricity and nuclear facilities, and the growing demand for alternative sources of energy, such as solar power — that initiating a position anywhere was a mistake.
Farmers’ Almanac is predicting a harsh winter in the Northeast … though if the best the sector can hope for is cold weather, that’s a sign. My advice? Get out.