The Streetwise column in April 10th issue of Barron’s looked at the outlook for the aging bull market. (See here) One of the interesting tidbits from the article discussed an analysis from Bespoke Investment Group that showed investors were moving to “quality” or popular stocks. According to the article the top fifty performing S&P stocks from January through February have been up another 0.3% since March 1. The bottom fifty performing S&P stocks during the January to February period were down 3%. The analysis also looked at P/E ratios, with the fifty most expensive S&P companies as of March 1 down 0.9% since, while fifty least expensive stocks were down 4.3%. I thought it would be interesting to see a similar analysis of the utility group.
Looking at a group of 43 fully regulated electric North American electric utilities (no IPPs or utes with merchant operations), the top ten performers in January and February were down 0.4% between March 1 and April 7. The ten utilities with the worst performance in January and February were actually up an average of 2.1%. The ten utilities with the highest P/E ratio at the end of February were up 0.7% after March 1, while the ten with the lowest P/E at the end of February were up 1.9%. So it seems like the utility group is acting a little different than the broader market. If the focus of the article is correct, that people are moving to quality names, it could be that investors view utilities as a much more generic group and as an alternative quality choice. These investors might be saying, “I want the safety of a quality name or a utility, here is a cheap or undervalued utility, I’ll buy that one.”