What's Up With Utilities?
“In sports, utility players usually don’t
get many headlines – nor do they get folks lining up hankering for autographs
like the big headliners do. But these are the guys on the team that help the
headliners to make the big plays and have THEIR photos splashed on the front
pages of the sports section” –SeekingAlpha.com1
It’s true, the stock market has been on the rise since
March of 2009. However, utilities stocks are not up as much. So why would AAP be
recommending utilities stocks??
Historically, utilities stocks- such as water,
telecommunications, electricity, and power- have provided strong dividends but
not necessarily at the rate of other more high risk stocks. One important thing
to remember about investing in utilities is that you are investing in products
and services that people MUST USE. Therefore, even in a down market, or a
recession, utilities is a relatively safe investment because they are a
necessity. This means that utilities companies will have their customers coming
back quarter after quarter, and year after year.
Consider this, when Ed Perks, a Senior Vice President with
Franklin Global Advisors, and the Portfolio Manager for the Franklin Income Fund
was pursuing opportunities that he felt were most attractive for the portfolio,
“from both the standpoint of income contribution for the fund, and securities
that would help us over the long term with potential appreciation…We found many
opportunities in different sectors including utilities, energy and technology”.2
Utilities, also known as Essential Services, are what keep
the water running, the heat on, and your phones and internet connected. In tough
economic times we cannot invest based on emotion we have to go with proven
methods and make safe plays. Therefore it is an opportune time to invest in
utilities stocks.
1. Seeking Alpha< http://seekingalpha.com> accessed 02 NOV
09.
2. Franklin Templeton Investments <http://www.franklintempleton.com>
accessed 02 NOV 09.
