Home   Logon   Mobile Site   Research and Commentary   About Us   Call 1.800.621.1675 or Email Us       Follow Us: 

Search by Ticker, Keyword or CUSIP       
 
 
 
Blog Home
Bob Carey
Chief Market Strategist
Click for Bio

Follow Bob on Twitter Follow Bob on LinkedIn View Videos on YouTube
 

  A Case For Investing In Two Basic Necessities
Posted Under: Sectors

 
 
View from the Observation Deck  
  1. Today's blog post is an FYI to individuals who invest in electric utility stocks, especially those who buy them with the intent of holding them over a long-time horizon. We believe that water utility and infrastructure stocks could be a complement to electric utility stocks.  
  2. Historically speaking, investors have been drawn to electric utility stocks because their dividend yields can at times be attractive relative to other income-oriented securities, as has been the case over the past 10-12 years, in our opinion. 
  3. What most investors may not know is that electricity and water are intertwined in complex ways via infrastructure, according to the University of Wisconsin College of Engineering. It notes that there can be no water from a tap without electricity, and there is no electricity from a switch without water. 
  4. The National Environmental Education Foundation reports that 77% of the demand for fresh water in the U.S. comes from irrigation and electric power plant cooling, followed by municipal and industrial usage at 20%.
  5. As indicated in the chart, the ISE Water Index outperformed the S&P 500 Utilities Index in all six of the time periods. Keep in mind that this is just one snapshot in time. 
  6. The 50/50 (Utility/Water) blend total returns outperformed the S&P 500 Index in the 5- and 15-Year periods in the chart. The 50/50 blend only lagged the S&P 500 Index by 1.12 percentage points for the 10-Year period ended 7/7/20.
  7. Our takeaway from the chart is that both utility and water stocks have lagged the broader market year-to-date as investors have opted for sectors like Technology that have benefited from the shelter-in-place strategy during the COVID-19 pandemic. Based on the historical total returns in the chart, we believe the current climate for utilities may potentially be worth consideration. 

This chart is for illustrative purposes only and not indicative of any actual investment. The illustration excludes the effects of taxes and brokerage commissions and other expenses incurred when investing. Investors cannot invest directly in an index. The S&P 500 Utilities Index is a capitalization-weighted index comprised of S&P 500 constituents representing the utilities sector. The ISE Water Index includes companies engaged in water distribution, water filtration, flow technology and other water solutions. The S&P 500 Index is an unmanaged index of 500 stocks used to measure large-cap U.S. stock market performance.

Download a PDF of this post, please click here.
Posted on Thursday, July 9, 2020 @ 4:09 PM • Post Link Share: 
Print this post Printer Friendly

These posts were prepared by First Trust Advisors L.P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.
Search Posts
MARKET ANALYSIS
Market Commentary and Analysis
Market Commentary Video
Weekly Market Commentary
Weekly Market Watch
Monthly Talking Points
Quarterly Newsletter
Market Observations
Subscribe To Receive Email
 


 PREVIOUS POSTS
U.S. Stocks Have Outperformed Foreign Stocks Since President Trump Was Elected
US Stock Markets Ended July 2, 2020
US Economy and Credit Markets Ended July 2, 2020
The Only Constant Is Change
A Snapshot Of Growth vs. Value Investing (Small-Caps)
US Stock Markets Ended June 26, 2020
US Economy and Credit Markets Ended June 26, 2020
How Internet Stocks Have Fared Since The End Of 2002
The Tech Sector Has Been The “Gold Standard” For 15 Years
US Stock Markets Ended June 19, 2020
Archive
Skip Navigation Links.
Search by Topic
Skip Navigation Links.

 
The information presented is not intended to constitute an investment recommendation for, or advice to, any specific person. By providing this information, First Trust is not undertaking to give advice in any fiduciary capacity within the meaning of ERISA, the Internal Revenue Code or any other regulatory framework. Financial professionals are responsible for evaluating investment risks independently and for exercising independent judgment in determining whether investments are appropriate for their clients.
First Trust Portfolios L.P.  Member SIPC and FINRA. (Form CRS)   •  First Trust Advisors L.P. (Form CRS)
Home |  Important Legal Information |  Privacy Policy |  California Privacy Policy |  Business Continuity Plan |  FINRA BrokerCheck
Copyright © 2021 All rights reserved.