Utility stocks power up
After months in the doldrums, utilities are coming back to life. One power generator focused on the deep south is a good pick.
As I discuss in my column this week, investors (those who are left) just aren't that interested in taking big risks. In this market environment, I can't really say I blame them. Credit downgrades, European bailouts, computer-driven shenanigans on the exchanges, and a multitude of other issues are keeping people on the fence.
The good news is, one of the favorite sectors for defensive investors -- one that has been on the slide since June -- is perking up once more. And that's utility stocks.
As the chart below shows, utility stocks represented by the Utilities Select SPDR ETF (XLU) badly lagged the Standard & Poor's 500 Index ($INX) in August and September as aggressive central bank intervention at home and overseas boosted economic growth expectations and worries about inflation -- both of which tend to be drags on non-cyclical, income-focused areas like utilities. But over the last few weeks, that's all changed and buyers are slowly returning.
Like I've been saying for months, the end of the year was always going to be a difficult one for the markets as major and by nature unpredictable political events transpire. What will Europe do about Spain and Greece? Who will win the U.S. presidential election? What will Congress do about the looming fiscal cliff of tax hikes and spending cuts worth some 5% of GDP? And what of the debt ceiling?
At the same time, the economic data has started to disappoint. August factory orders plunged by the most since the depths of the recession in January 2009. Durable goods orders also fell hard. You can see the disappointment in the drop in Citigroup Economic Surprise Index, shown above, which stocks tend to track.
Given all this, there is good reason for people to be shifting into stocks like these.
I'm recommending my newsletter subscribers take advantage by adding exposure to Entergy Corp. (ETR), a power generator focused on the deep south. Shares offer a 4.8% yield and are breaking up and out of a three-month consolidation pattern. I am also adding shares to my Edge Letter Sample Portfolio.
Check out Anthony's investment advisory service The Edge. A two-week free trial has been extended to MSN Money readers. Click here to sign up. Contact Anthony at firstname.lastname@example.org and follow him on Twitter at @EdgeLetter. You can view his current stock picks here. Feel free to comment below.
More from Top Stocks
MORE ON MSN MONEY
Copyright © 2013 Microsoft. All rights reserved.
Quotes are real-time for NASDAQ, NYSE and AMEX. See delay times for other exchanges.
Fundamental company data and historical chart data provided by Thomson Reuters (click for restrictions). Real-time quotes provided by BATS Exchange. Real-time index quotes and delayed quotes supplied by Interactive Data Real-Time Services. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by SIX Financial Information.
Try as the bears might, they couldn't break U.S. stocks. But investors still face frothy prices and considerable headwinds.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.