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Utilities ETF (XLU) Hits New 52-Week High

Sweta Jaiswal, FRM

For investors looking for momentum, Utilities Select Sector SPDR Fund XLU is probably a suitable pick. The fund just hit a 52-week high, up roughly 28.1% from its 52-week low of $50.81/share.

But does it have more gains in store? Let’s take a look at the fund and its near-term outlook to gain an insight into where it might be headed:

XLU in Focus

The fund provides investment results that, before expenses, replicate the price and yield performance of the Utilities Select Sector Index. XLU is charging 13 bps in fees. The fund has amassed $11.39 billion in AUM (see all Utilities/Infrastructure ETFs here).

Why the Move?

The Fed has cut rates for the second time in September 2019. In a lower-rate environment, high-dividend-yield sectors such as utilities generally are the biggest beneficiaries given its sensitivity to interest rates. This is especially true as it offers higher returns due to its outsized yields. Further, Sino-US trade spat ambiguity, rising Middle East tensions, talks of Trump impeachment and soft consumer confidence data, uncertainty in market conditions due to geopolitical tensions, slowdown in the global economy and Brexit woes are making investors jittery, adding to the lure of these funds.

More Gains Ahead?

Currently, XLU has a Zacks Rank #3 (Hold) with a Medium risk outlook. Therefore, it is hard to get a handle on its future returns one way or the other. However, it seems that XLU might remain strong given a positive weighted alpha of 25.0 and a mediocre risk as depicted by a 20-day volatility of 10.3%. As a result, there is definitely still some promise for investors who want to ride on this surging ETF a little further.

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Utilities Select Sector SPDR Fund (XLU): ETF Research Reports
 
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