Stocks of utility companies have had a rough couple of years, with the Utilities ETF (XLU) lagging the S&P 500 ETF (SPY) by almost 37% over that period. Meanwhile, the street’s current stance appears to be mixed. Moody’s just downgraded the U.S. regulated utility sector to negative, citing the new tax law as having an adverse impact on cash levels. In contrast, Morgan Stanley has upgraded the sector to Outperform, due to its role as a defensive stock market play. Given these mixed views, we thought it would be a good time to review MRP’s Long Electric Utilities theme.
A rising interest rate environment is rarely good news for the rate-sensitive utilities sector, yet there are transformational changes on the horizon which should boost electric utilities going forward and override the negative impact of higher rates . . .