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Utilities ETF (XLU) Hits New 52-Week High

Sweta Jaiswal, FRM

For investors seeking momentum, Utilities Select Sector SPDR Fund XLU is probably a suitable pick. The fund just hit a 52-week high, up roughly 29.9% from its 52-week low of $52.83/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 $11.45 billion in AUM (see all Utilities/Infrastructure ETFs here).

Why the Move?

China is grappling with the coronavirus outbreak that has already claimed at least 80 lives in China along with more than 2,700 confirmed cases. In fact, more than 30,000 people are under observation in the country. The coronavirus has been spreading really fast over the past week and has now infected people in Hong Kong, United States, Australia, Malaysia, Thailand, France, Japan, Taiwan, Vietnam, Singapore, South Korea, Macao and Nepal, with its epicenter in Wuhan, China. Thus, the panic in global markets is adding to the lure of safer investment picks. Notably, in a lower-rate environment, high-dividend-yield sectors such as utilities are generally the biggest beneficiaries given their sensitivity to interest rates and offering of higher returns due to outsized yields.

More Gains Ahead?

Currently, XLU has a Zacks Rank #2 (Buy) with a Medium risk outlook. Moreover, it seems that XLU might be strong given a positive weighted alpha of 28.0 .

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