Utilities Select Sector SPDR Fund ETF (XLU), which tracks the Utilities sector, took a beating in 2023 with a slump of over 10%, compared to a 25% gain in the broader S&P 500 Index.
The Utilities sector, which has companies ranging from electricity providers to water suppliers, was the worst performing sector during the year, hammered by rising interest rates. XLU fell nearly 1% in 2022.
Investors mostly flock to utilities companies during period of economic uncertainty as the sector is known for high dividend payout.
U.S. stock fund flow in and out of the sector was mostly negative throughout the year, with the Utilities sector-focused ETF having a net outflow of $389.1 million.
What are the top 5 movers in 2023?
- Gainers: NRG Energy (NRG) +62.4%.
- Constellation Energy (CEG) +35.6%.
- Edison International (EIX) +12.8%.
- PG&E (PCG) +10.9%.
- Atmos Energy (ATO) +3.4%.
- Losers: AES (AES) -33%.
- NextEra Energy (NEE) -27.3%.
- Eversource Energy (ES) -26.4%.
- Dominion Energy (D) -23.4%.
- Ameren (AEE) -18.7%.
What Quantitative Measures say?
XLU received a Strong Sell rating from Seeking Alpha’s Quant Rating system with a score of 1.43 out of 5, dragged down by D- ratings in its momentum and risk categories. However, the sector got A+ for liquidity and dividend.
What analysts expect?
Seeking Alpha analysts are bullish on XLU and gave it a Buy rating. Four out of five analysts surveyed by Seeking Alpha in the last 90 days consider it a Buy, while one gave Sell.
“While there are some broader risks to be aware of, the sector’s top companies are all in good shape and trading at attractive valuations,” pointed out a recent Seeking Alpha analysis.
Aoifinn Devitt, Moneta’s chief investment officer, sectors such as the utilities and healthcare (XLV), that have been overlooked all year, might see gains in 2024.
“There’s a lot of good fundamental value in those stocks, and the growth of value rotation is one pattern that does seem to play out,” Devitt said.
However, Citi Research in its U.S. Equity Strategy report, rated XLU as underweight, while UBS kept Utilities as its least preferred sector.
