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Investors seeking income by scouting the best dividend ETFs have seen a double blessing in 2019 in both stocks and bonds. Still, patience is essential.
It will be "California Dreamin'" as in dreaming of electricity for a number of Northern California residents as utility group PG&E Corp is cutting electricity in order to minimize the risk of wildfires. This could put leveraged energy funds in play for savvy investors who may sense an opportunity. Per a Bloomberg report, “on Wednesday, utility PG&E Corp. began cutting electricity to almost 800,000 California homes and businesses -- representing roughly 2.4 million people -- to prevent wildfires as high winds are forecast to whip through the state.
One interesting signal of how investors are re-prioritizing their choices nowadays comes from observing a comparison chart of two particular market sectors and the exchange-traded funds (ETFs) that track them. The chart below shows that, as of late, investors are placing what they need above what they want. The roller-coaster action shown by the S&P 500 (SPX) demonstrates that investors are worried about where stocks will end up next.
Thanks to a combination of low-interest rates and investors' preference for higher-yielding defensive assets, the Utilities Select Sector SPDR (XLU) , the largest utilities sector ETF, is one of the best-performing sector ETFs this year. Up more than 20% year-to-date, XLU may appear poised for a breather, but some market observers believe the utilities sector can continue trending to the upside. The utilities sector is one of this year’s best-performing groups, underscoring the notion that many investors will embrace utilities stocks and ETFs during favorable interest rate environments.
We have highlighted some investing ideas that could prove to be extremely beneficial for investors in the fourth quarter in the current market environment.
Editor's note: This article was originally published on October 3, 2019 via Legacy Research Group."Axe" and "woodshed"…These are the two words to best describe the U.S. stock market over the last two days.InvestorPlace - Stock Market News, Stock Advice & Trading TipsYesterday, the Dow plunged by more than 500 points.That's a 2% drop.And over the past two days, it's down by more than 3%. That's the worst start to the quarter since 2008.And the S&P 500 chalked up its worst start to the quarter in about a decade.It tumbled nearly 2% yesterday. And it's down about 3% since the start of the month.These plunges have investors rattled…But as you'll see today, they're small potatoes compared with what unsuspecting investors will suffer next bear market.That's why, here at the Cut, we've been urging you to take the time NOW to prepare your portfolio for the next bear.You're not going to accurately time the top of this bull market to the day. But as Rick Rule, the president and CEO of Sprott U.S. Holdings, put it at the Legacy Investment Summit in California last week, that's not the point.Rick is a legendary investor in natural resource stocks. And he's made hundreds of millions of dollars for himself and for his clients by being attuned to market cycles.As Rick told the folks who joined us for the summit, you don't need a crystal ball. What you can be sure of is that bear markets follow bull markets… and vice versa. Rick…The biggest lesson with regards to investing in natural resource stocks in particular - but also stocks in general - is that they're cyclical.Bear markets are the authors of bull markets. Bull markets are the authors of bear markets. The slogan I use to educate investors as quickly as I can about the implications of this is that you are either a contrarian, or you will be a victim.That means paying attention now to the prospect of a coming bear market… even if there's still some life left in the bull.It sounds obvious. But it's a key point. The time to prepare for a bear market is before it's wreaked havoc… not after.The average bear market loss for the S&P 500 is 46%…And you'd be lucky to be saddled with "just" the average loss.Going back to 1929, there have been eight bear markets in the U.S. They've lasted between six months to nearly three years. And they've sent the S&P 500 plunging between 27% and 82%.If you're 100% invested in stocks, you're risking a "ruinous loss."That's the term Legacy Research cofounder Bill Bonner uses for a loss you can't recover from.Bear markets typically accompany recessions…Here at the Cut, we call bear markets and recessions the "terrible twins."Of the eight bear markets going back to 1929, five have been accompanied by a recession.And despite what you might hear from TV's talking heads… or government officials… a recession is very much in the cards.But don't take it from me…Take it from the folks paid to worry about recessions and their effect on corporate sales - America's chief financial officers (CFOs).In its latest quarterly survey of 255 CFOs at U.S. firms, Duke University reported that two in three of them see a recession coming by the end of next year.And more than half see a recession by the third quarter of 2020.That's why we've been like a broken record on the importance of diversification…The simplest, most effective way to avoid a ruinous loss is to spread your wealth across different "buckets," or asset classes.That's why you should make it a core part of your investment philosophy. Here's Teeka Tiwari, who heads up our Palm Beach Confidential advisory, with more…What percentage of your money should you invest in stocks? What percentage in bonds? How much real estate should you own? What percentage in collectibles? How much in cryptos? What amount of cash? What amount in gold?How you answer these questions is what really moves the needle in terms of your wealth.And when you're thinking about your portfolio mix, it's important to not get stuck looking in the rearview mirror. It's what's coming down the pike that matters.Your two best friends in a bear market are gold and cash…Unlike stocks, bonds, and other financial assets, physical gold - either stored in a vault or sensibly at home - isn't someone else's promise to pay.Gold is real wealth. It's been recognized as real wealth going back thousands of years.Gold is also "disaster insurance."As our globetrotting geologist Dave Forest has been telling readers of our International Speculator advisory, gold is the best precious metal to own in a crisis. Take a look…Of the five precious metals Dave looked at, gold is the only one that went up before, during, and after the last four major financial crises.Cash is also great to have in a bear market…Think of cash like ballast in a ship. It keeps it steady in a storm.When stocks are tanking… and panic is in the air… cash will stay steady as a rock.Cash also gives you the ability to buy beaten-down stocks at bargain-basement prices. In other words, cash gives you the courage… and the ability… to buy low and sell high.And that's how you make real money as an investor.Think also about the kinds of stocks you own…Because some stocks do better when the bear is stalking than others.It's something Jason Bodner flagged for our Palm Beach folks earlier today.As regular readers know, Jason used to work at Wall Street financial services firm Cantor Fitzgerald. He often traded more than $1 billion in stock for wealthy clients. And he learned how the stock market works from the inside out.Then, after nearly 20 years on Wall Street, he walked away from it all. And he used his knowledge of what really moves stock prices to develop his own "unbeatable" stock-picking system.It blends the strategies of elite Wall Street traders with the work of Nobel Prize-winning mathematicians. It even uses artificial intelligence (AI).And it has one aim. It detects when billions of dollars in institutional money is headed into certain stocks. This allows Jason and his readers to ride them higher as the Wall Street money flows in.Lately, Jason's system has been detecting a surge of defensive buying…It's also detecting heavy-selling stock sectors that are the most sensitive to a recession. Here he is with more on that…Without getting into too much detail, when my system flashes green, it means big money is buying. When it flashes red, it means big money is selling.Last week, we saw plenty of red in the growth-heavy tech sector. And 82% of the sell signals my system generated were for software stocks.On the flip side, my system detected big buying in utilities. Investors generally view the sector as defensive because it offers stability and strong yields.You can see what that looks like in the chart below.The defensive utilities exchange-traded fund (ETF) is up 3% since August 30, as more growth-sensitive software stocks have fallen.As Jason puts it, there's always a bull market somewhere…You just have to know how to find it.Remember, his system can detect when deep-pocketed investors start pouring into - or out of - certain stocks or sectors. This allows his readers to stay ahead of the crowd.For instance, in a recent study that covered 30 years of data, Jason's system pinpointed the No. 1 stock on the S&P 500 almost every year (including the past six years in a row).And it beat the returns of superinvestors, such as Warren Buffett and Carl Icahn, by 500-to-1 over the same period.And last night, Jason showed thousands of people how it can make them more money - with more certainty - than almost any other investment they may have tried in their life.Sound too good to be true? See it for yourself right here.Regards,Chris Lowe October 3, 2019 Dublin, Ireland More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 10 Best ETFs for 2019: The Race Is a Little More Gnarly Now * 7 Next-Generation Healthcare Stocks to Buy * Are These 10 High-Yielding S&P Dividend Stocks Traps or Treasures? The post Cash and Gold Are the Two Best Assets in a Bear Market appeared first on InvestorPlace.
While many corners of the equity world witnessed a solid run, a few sector ETFs performed incredibly well, thereby comfortably crushing the broader markets.
For the reluctant equities investor, Global investment firm Goldman Sachs says it’s not safe to dive headfirst out of safe haven assets and back into stocks just yet. Ever since 1928, October has proven to be 28% higher in terms of volatility. “We believe high October volatility is more than just a coincidence,” John Marshall, equity derivatives strategist at Goldman, said in a note Friday.
Entering Tuesday, the Utilities Select Sector SPDR (XLU) , the largest utilities sector ETF, was up nearly 21% year-to-date after hitting another record high on Monday. The utilities sector is one of this year’s best-performing groups, underscoring the notion that many investors will embrace utilities stocks and ETFs during favorable interest rate environments. The Federal Reserve recently obliged by lowering interest rates last week for the second time this year and another rate cut is possible before the end of this year.
The Utilities sector remains one of the best sectors in the S&P 500. Looking at the SPDR Utilities Sector fund ETF (XLU), prices remain in an uptrend after climbing 2.36% in the last week making it the best weekly performer. Prices have made an impressive move climbing up over 24% in the last year.
These days, the news cycle is driving the show. It seems that every day, how the market finishes is 100% based on what's going on with the trade war, what the Federal Reserve is doing, or just how good or bad the data has been. For conservative or investors near or in retirement, it can be maddening. Which is why utility stocks could be the best thing for their portfolios.After all, utility stocks feature plenty of steady cash flows and high dividends. It doesn't matter so much what the economy is doing as people still need to heat their homes, keep the water flowing, and power the lights. This steadfastness makes utility stocks a prime choice for conservative investors. And now with the Fed decreasing rates, other investors tend to like them too.No wonder why the sector proxy -- the Utilities Select Sector SPDR ETF (NYSEArca:XLU) -- has gained over 21% year-to-date. That's before dividends.InvestorPlace - Stock Market News, Stock Advice & Trading Tips * 8 Dividend Stocks to Buy for a Recession As you can see, there is power in owning the power producers. For conservative investors, the sector's strength and boring nature really do pay plenty of benefits in a market like this. With that, here are five utility stocks worth buying today. Utility Stocks Perfect For Conservative Investors: UGI (UGI)Source: Shutterstock Dividend Yield: 2.58%For conservative investors looking at utility stocks, they should focus on the number 33. That's the number of consecutive years that utility UGI (NYSE:UGI) has managed to increase its dividend for. And given its recent moves, it should be able to add 34, 35, and so on to that impressive streak.The key is that UGI has been smartly using the utility holding company model to its advantage.UGI owns plenty of boring electric and gas operations in the Northeast. These regulated assets provide the utility stock with plenty of steady cash flows. The firm has been using these cash flows to fund non-regulated and tangential assets. These assets provide higher profit margins and an extra boost to its bottom line.A prime example would its recent buyout of Columbia Midstream Group. UGI already owned several FERC regulated interstate natural gas trunk lines in the region. With the addition of Columbia, the utility now gained several gathering and processing assets that feed into its pipeline system. This allows UGI to instantly see scale and additional profits.This strategy seems to be working for UGI. Last year was one of its best on record and the gains have continued this year as well. Adjusted EPS for last quarter -- after accounting for the buyout of its MLP subsidiary AmeriGas -- jumped more than 44% year-over-year.With profit gains like that, UGI should have no problems hitting its 4% annual dividend growth targets. York Water (YORW)Source: Shutterstock Dividend Yield: 1.77%If you had to guess what stock has been paying dividends the longest, names like Coca-Cola (NYSE:KO) or Proctor & Gamble (NYSE:PG) may come to mind. But the title goes to a small and overlooked utility stock that may just be perfect for conservative investors. We're talking about humble York Water (NASDAQ:YORW) and its dividend streak of 203 consecutive years.York has been paying a dividend since its founding in 1816. The key comes from its operating niche. Water utilities are often monopolies in their operating regions. Moreover, they are heavily regulated. In this case, YORW provides water and treatment for 48 municipalities with York and Adams Counties in Pennsylvania. What's great about York is that it really has tried to grow massive like some water utilities. It just does what it does. Because of this, its results run like clockwork.And York has been pretty successful at winning rate increases from regulators. The latest one was approved at the start of the year. Given water's highly regulated nature, these rate increases provide just enough oomph to pay for rising costs, upgrades and boost profits. And York has handed those profits back via dividend increases. The latest one was a 4.4% jump. * 7 Stocks the Insiders Are Buying on Sale The reality is, YORW is not going to set your portfolio on fire and grow 1500%. But it what it can do is provide plenty of stability and income potential. Exactly what utility stocks should do. Consolidated Edison (ED)Source: Shutterstock Dividend Yield: 3.24%No list of stodgy utility stocks can be complete with Consolidated Edison (NYSE:ED). ConEd has been providing electricity, steam and natural gas for metropolitan New York for more than 180 years. And it turns out this niche of powering New York City, Westchester and parts of New Jersey is a very good one to be in. Thanks to their growing populations, steady economies and overall top-notch fundamentals, ConEd has become a profit and dividend champion.And the growth could keep coming. That's because ConEd has started to upgrade and make its system more high-tech.For starters, that includes plenty of renewable and solar energy projects in its operating region. Con Edison is actually the second-largest solar energy producer in North America. Secondly, ConEd has begun to roll-out new smart-meters and demand-response programs. This includes across its electric and natural gas operations. Here, consumers are rewarded for using less power at peak times. But for ConEd, this can be huge cost savings.Already, the utility has been struggling to meet the needs of New Yorker's when it comes to gas demand. It's simply having to buy more gas from third party players to meet the demand. Those costs are hurting its bottom line. With demand response, ED should be able to save a few dollars and reduce its outlays for gas. Even better is that regulators have allowed the utility to pass on the smart-meter costs to consumers. For ED stock, it's a win-win.It's a big win for investors as well and should help keep the dividends flowing at ED for years to come. NextEra Energy (NEE)Source: Shutterstock Dividend Yield: 2.22%Speaking of renewable energy, no utility stock is better at it than NextEra Energy (NYSE:NEE). That's because like previously mentioned UGI, NEE has managed to use the utility holding company model perfectly.To start with, NextEra owns plenty of regulated utility assets in the sunbelt. These more than 4.6 million customers provide plenty of stable cash flows into its coffers and used those cash flows to build-out its non-regulated assets. More specially, NextEra has become the largest producer of solar and wind power in the United States. The best part is that renewable energy has finally hit parity with traditional fossil fuels in many cases. And given the lower costs to maintain a solar or wind farm, margins are getting quite juicy at NEE.NextEra is able to sell excess power produced at these solar farms to other utilities looking to meet new regulations or fill their own power needs. At this point, it's just easier for them to buy power from NEE than build a renewable energy farm on their own.For NEE this has meant plenty of profit growth over the years. Since 2003, EPS has managed to grow at a CAGR of nearly 8% per year. For a utility stock, that's a very strong rate of growth. And NextEra hasn't been shy about handing out excess cash to investors. Dividends have grown by over 9% in that time. * 10 Recession-Resistant Services Stocks to Buy With its business model continuing to see benefits, NextEra represents one of the best utility stocks out there for investors. Vanguard Utilities ETF (VPU)Source: Shutterstock Dividend Yield: 2.73%As the saying goes, there's safety in numbers. To that end, a broader strategy may be best. Which is why investors may want to go with an ETF that covers the utility stocks. Surely, you could go with the previously mentioned XLU -- and it's a fine choice. But the Vanguard Utilities ETF (NYSEArca:VPU) might be a better pick.The reason comes down to coverage. The XLU holds just 28 utility stocks. VPU, however, offers broader coverage given its inclusion of large-, mid- and small-cap firms. That wide-sweeping approach bumps its total number of holdings to 69 different utilities. This includes all of them on this list. Better still is that VPU also beats the SPDR on expenses -- 0.10% vs. 0.13% -- and in terms of current dividend yield.Those slight differences in holdings, yield, and expenses have made VPU the better fund for the long haul. Over the last decade, the Vanguard ETF has managed to return about 12.46% annually. That's just over a half a percent more per year than the SPDR. Investing is a game of inches and that slight difference compounded over time really adds up. And yet, asset and trading volumes for the VPU are equally as swift.As a result, VPU should get the nod from investors looking for a broader approach to utility stocks. Given the market's rising volatility, they may just want to do that.At the time of writing, Aaron Levitt did not hold a position in any stock mentioned. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 8 Dividend Stocks to Buy for a Recession * 10 Companies Making Their CEOs Rich * The 7 Best S&P 500 Stocks of 2019 So Far The post 5 Utility Stocks for Conservative Investors appeared first on InvestorPlace.
The Fed slashed interest rates for the second time since the financial crisis by 25 bps to 1.75-2% in its policy meeting to sustain a decade-long economic expansion.
With Treasury yields tumbling and the Federal Reserve poised to continue lowering interest rates, investors are flocking to high-yield sectors and the related ETFs are surging. For example, the Utilities ...