Market Scare: When Utilities Are Hot Again

The Dow Jones Industrial Average and the Standard & Poor’s 500 Index hit all-time highs this last week, but a sharp sell-off on Friday caused some serious concerns. Fear and greed drive the markets, and investors’ greed wants the upside while the fear worries about the downside. With momentum stocks in tech and biotech getting absolutely pounded, investors wanting equity upside with protection against too much downside are flocking to defensive stocks and value stocks. Most utilities are very defensive by nature, and oddly enough were the only sector with gains on Friday.

As it turns out, utilities rose for the week by more than 1% on average. The sector is also up over 4% in the last month. 24/7 Wall St. has identified the top utilities in the S&P 500 which were up for the week and up even on Friday.

PG&E Corporation (NYSE: PCG) managed to rise over 6.1% in the last week, and its gain on Friday was by 1.5% to $44.47. The west coast power company is still shy of a 52-week high, and it pays a dividend yield of about 4.2%. Just be advised that the consensus price target here is only $1.50 higher at $45.94.

Entergy Corporation (NYSE: ETR) rose more than 3.6% in the last week, and shares were up 1.4% to $69.07 on Friday. Entergy’s consensus price target is actually much lower at $63.93, but the 52-week range is $60.22 to $72.60. Entergy has a high dividend yield for its investors at 4.8%.

Exelon Corporation (NYSE: EXC) was the third best performer last week, with a gain of over 3.5%. Most of the gain came from Friday’s 2% gain to $34.47. While this is still more than $3 shy of a 52-week high, the consensus analyst price target is down at $29.00. Exelon’s yield is also under 4% — closer to 3.7%.

NRG Energy, Inc. (NYSE: NRG) was the fourth best utility for the week. Its gain of just over 3.5% was mostly attributed to Friday’s nearly 2.3% gain to $32.66. NRG hit a new 52-week high of $32.74 on Friday as well, and the consensus price target is up at $33.73. Unfortunately, NRG’s dividend yield is not too great at 1.5%.

Utility stocks, even including the power generation names here in the S&P 500, are simply not supposed to be the most exciting stocks. But when the market hits a new all-time high and stocks immediately retreat, what does it tell you when the boring utility sector ends up being the only bright sector in the market. Investors may look to hide in defensive stocks, but many of these companies are trading at prices north of — or very close to — what Wall Street analysts believe they are worth.

There is always a bull market somewhere, and this time it is in the defensive utility sector.

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