In the worst economic environment in more than a decade, the utilities sector is demonstrating its resiliency. With the second quarter earnings season now behind us, 20 of the 28 companies comprising the S&P 500 Utilities Index1 reported higher earnings, on an adjusted operating basis, compared to the same quarter a year ago. The average percentage increase for all companies in the Index was well above our expectations and we believe this supports the likelihood that 2020 earnings for the sector will be higher than last year.
In a recent episode of the Phil Bak podcast, Reaves’ President John Bartlett explained why the earnings streams of utility companies have held up so well during a pandemic-induced economic slowdown.
As part of the interview, Bartlett went on to share his views on infrastructure investing, and on many of the other sectors in which Reaves’ invests. He also took a deeper dive into the utilities sector, explaining why understanding the state and local regulatory framework is important to actively investing in the utility sector, and why efforts to make the energy grid greener can be a win-win for both utility customers and stocks.
Bartlett also touched on the fact that despite the sector’s earnings stability, utilities remain under-represented in many investors’ portfolios. He reiterated the Firm view, “Utilities should be considered the lowest risk part of anyone’s portfolio, and candidly, they still remain institutionally under owned and they’re still a pretty small part of the S&P 5002, so it’s our opinion that people still continue to overlook these stocks,” he said.
Click here to listen to the full interview from the Phil Bak podcast.
Disclosures:
Reaves Asset Management is an investment adviser registered with the Securities and Exchange Commission under the Investment Advisers Act of 1940. Registration does not imply any skill or training. Reaves is a privately held, independently owned “S” corporation organized under the laws of the State of Delaware.
The information provided in this blog does not constitute, and should not be construed as, investment advice or recommendations with respect to the securities and sectors listed. Investors should consider the investment objective, risks, charges and expenses of all investments carefully before investing. Any projections, outlooks or estimates contained herein are forward looking statements based upon specific assumptions and should not be construed as indicative of any actual events that have occurred or may occur.
1 The S&P 500 Utilities Index is a capitalization-weighted index containing electric and gas utility stocks (including multiutilities and independent power producers). Prior to July 1996, this index included telecommunications equities.
2 The S&P 500 Index (“S&P 500) is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The typical Reaves portfolio includes a significant percentage of assets that are also found in the S&P 500. However, Reaves’ portfolios are far less diversified, resulting in higher sector concentrations than found in the broad-based S&P 500.
Past performance is no guarantee of future results.
All investments involve risk, including loss of principal.
All data is presented in U.S. dollars.
Important Tax Information: Reaves Asset Management and its employees are not in the business of providing tax or legal advice to taxpayers. Any such taxpayer should seek advice based on the taxpayer’s particular circumstances from an independent tax adviser.
