Best And Worst Q1 2020: Utilities ETFs And Mutual Funds


The Utilities sector ranks tenth out of the 11 sectors as detailed in our Q1’20 Sector Ratings for ETFs and Mutual Funds report. Last quarter, the Utilities sector ranked eleventh. It gets our Unattractive rating, which is based on an aggregation of ratings of the 73 stocks in the Utilities sector. See a recap of our Q4’19 Sector Ratings here.

Figures 1 and 2 show the five best and worst rated ETFs and mutual funds in the sector. Not all Utilities sector ETFs and mutual funds are created the same. The number of holdings varies widely (from 23 to 214). This variation creates drastically different investment implications and, therefore, ratings.

Investors should not buy any Utilities ETFs or mutual funds because none get an Attractive-or-better rating. If you must have exposure to this sector, you should buy a basket of Attractive-or-better rated stocks and avoid paying undeserved fund fees. Active management has a long history of not paying off.

Our Robo-Analyst technology empowers our ETF and mutual fund rating methodology, which leverages our analysis of each fund’s holdings.

Figure 1: ETFs with the Best and Worst Ratings – Top 5

* Best ETFs exclude ETFs with TNAs less than $100 million for inadequate liquidity.

Sources: New Constructs, LLC and company filings

JHMU is excluded from Figure 1 because its total net assets are below $100 million and do not meet our liquidity minimums.

Figure 2: Mutual Funds with the Best and Worst Ratings

* Best mutual funds exclude funds with TNAs less than $100 million for inadequate liquidity.

Sources: New Constructs, LLC and company filings

ICTUX is excluded from Figure 2 because its total net assets are below $100 million and do not meet our liquidity minimums.

FXU is the top-rated Utilities ETF and EVUYX is the top-rated Utilities mutual fund. Both earn a Neutral rating.

PSCU is the worst rated Utilities ETF and RYUTX is the worst Utilities mutual fund. They both earn a Very Unattractive rating.

In total, 73 stocks of the 2,900-plus we cover are classified as Utilities stocks.

The Danger Within

Buying a fund without analyzing its holdings is like buying a stock without analyzing its business and finances. Put another way, research on fund holdings is necessary due diligence because a fund’s performance is only as good as its holdings’ performance.

Performance of Holdings = Performance of Fund

Analyzing each holding within funds is no small task. Our Robo-Analyst technology enables us to perform this diligence with scale. More of the biggest names in the financial industry (see At BlackRock, Machines Are Rising Over Managers to Pick Stocks) are now embracing technology to leverage machines in the investment research process. Technology may be the only solution to the dual mandate for research: Cut costs and fulfill the fiduciary duty of care. Investors, clients, advisors and analysts deserve the latest in technology to get the diligence required to make prudent investment decisions.

Figures 3 and 4 show the rating landscape of all Utilities ETFs and mutual funds.

Figure 3: Separating the Best ETFs From the Worst ETFs

Sources: New Constructs, LLC and company filings

Figure 4: Separating the Best Mutual Funds from the Worst Mutual Funds

Sources: New Constructs, LLC and company filings

This article originally published on Jan. 15, 2020.

Disclosure: David Trainer, Kyle Guske II, and Matt Shuler receive no compensation to write about any specific stock, sector or theme.

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Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

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