The Dow Jones Utilities had another strong day today, recovering from the end of quarter drubbing last Friday, and finishing firmly in the green on good volume today.
The Utilities (i.e. the UTE's) were the best performing sector in a very bad q1 '07, up 8.44% according to one Reuters story published over the weekend.
There are a couple of ways using ETF's you can play the Utility sector, which is a relatively small part of the S&P 500 at 3% of the earnings weight and 3% of the S&P 500's market cap: The XLU is the Spyder ETF, of which the three largest holdings comprise 24% of the ETF, and they are Exelon at 10% of the XLU ETF, TXU at 7% and Dominion Resources at 7%.
Another way to get exposure to utilities is via the UTH, or Merrill's HOLDR's ETF: the three largest holdings comprise 35% of the UTH, and they are Exelon at 15%, TXU at 12% and Southern Company at 8%.
UTH may be a little more volatile than the XLU since TXU has a bigger weighting, particularly if there winds up to be a bidding war in TXU with the private equity buyout, similar to what happened to Equity Office Property. Both the XLU and the UTH charts look pretty good, but with TXU having a bigger weighting in the UTH, it may be a a little spicier play if there is a shooting war for TXU.
Currently, we have a position only in the XLU within client accounts. Today, the XLU closed above the $40.30 high print for the XLU on 2/26/07, and it closed above the 2/26 high on very good volume of 5.1 shares.
Once again q1 '07 has started out with Utilities and Basic Materials as the top two performing sectors year-to-date, just like last year, and yet these two sectors together comprise just 6% of the S&P 500 by market cap and earnings weight.
(Our chart is complements of Telechart i.e. Worden Technical Analaysis at www.worden.com. )
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