Utilities Sector 1Q18: Best And Worst

Utilities Sector 1Q18: Best And Worst

The Utilities sector ranks seventh out of the 11 sectors as detailed in our 1Q18 Sector Ratings for ETFs and Mutual Funds report. Last quarter, the Utilities sector ranked ninth. It gets our Unattractive rating, which is based on an aggregation of ratings of 11 ETFs and 35 mutual funds in the Utilities sector as of January 15, 2018. See a recap of our 4Q17 Sector Ratings here.

Check out our H2 hedge fund letters here.


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Figure 1 ranks from best to worst the eight Utilities ETFs that meet our liquidity standards and Figure 2 shows the five best and worst-rated Utilities mutual funds. Not all Utilities sector ETFs and mutual funds are created the same. The number of holdings varies widely (from 16 to 236). This variation creates drastically different investment implications and, therefore, ratings.

Investors seeking exposure to the Utilities sector should buy one of the Attractive-or-better rated ETFs or mutual funds from Figures 1 and 2.

Our Robo-Analyst technology empowers our unique ETF and mutual fund rating methodology, which leverages our rigorous analysis of each fund’s holdings.[1] We think advisors and investors focused on prudent investment decisions should include analysis of fund holdings in their research process for ETFs and mutual funds.

Figure 1: ETFs with the Best & Worst Ratings – Top 5

* Best ETFs exclude ETFs with TNAs less than $100 million for inadequate liquidity.

Sources: New Constructs, LLC and company filings

PowerShares DWA Utilities Momentum Portfolio (PUI) and John Hancock Multifactor Utilities ETF (JHMU) are excluded from Figure 1 because their total net assets (TNA) are below $100 million and do not meet our liquidity minimums.

Figure 2: Mutual Funds with the Best & Worst Ratings – Top 5

* Best mutual funds exclude funds with TNAs less than $100 million for inadequate liquidity.

Sources: New Constructs, LLC and company filings

Rydex Guggenheim S&P 500 Equal Weight Utilities ETF (RYU) is the top-rated Utilities ETF and American Century Quantitative Equity Utilities Fund (BULIX) is the top-rated Utilities mutual fund. Both earn an Attractive rating.

PowerShares S&P SmallCap Utilities Portfolio (PSCU) is the worst rated Utilities ETF and ICON Utilities Fund (ICTVX) is the worst rated Utilities mutual fund. Both earn a Very Unattractive rating.

74 stocks of the 3000+ we cover are classified as Utilities stocks.

The Danger Within

Buying a fund without analyzing its holdings is like buying a stock without analyzing its business and finances. Put another way, research on fund holdings is necessary due diligence because a fund’s performance is only as good as its holdings’ performance. Don’t just take our word for it, see what Barron’s says on this matter.


Analyzing each holding within funds is no small task. Our Robo-Analyst technology enables us to perform this diligence with scale and provide the research needed to fulfill the fiduciary duty of care. More of the biggest names in the financial industry (see At BlackRock, Machines Are Rising Over Managers to Pick Stocks) are now embracing technology to leverage machines in the investment research process. Technology may be the only solution to the dual mandate for research: cut costs and fulfill the fiduciary duty of care. Investors, clients, advisors and analysts deserve the latest in technology to get the diligence required to make prudent investment decisions.

Figures 3 and 4 show the rating landscape of all Utilities ETFs and mutual funds.

Figure 3: Separating the Best ETFs From the Worst ETFs

Sources: New Constructs, LLC and company filings

Figure 4: Separating the Best Mutual Funds from the Worst Mutual Funds

Sources: New Constructs, LLC and company filings

This article originally published on January 16, 2018.

Disclosure: David Trainer, Kyle Guske II, and Pete Apockotos receive no compensation to write about any specific stock, sector or theme.

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[1] Ernst & Young’s recent white paper “Getting ROIC Right” proves the superiority of our holdings research and analytics.

Article by Kyle Guske II, New Constructs

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