It appears that Wall Street’s 2014 love affair with utility stocks has come to an abrupt end. This should not come as a surprise. Utility stocks have been declining in 2015. In fact, according to a sector-by-sector analysis, the utility sector is the worst performing on Wall Street.
Wall Street has continued to sour on utility companies. Why is this? A large chunk of utility company investors are looking for income. They are looking for dividends. Since they can get better returns elsewhere, they are dumping on the stock. This really is too bad.
I truly believe that, thanks to lower energy costs, utility companies can reduce their costs and produce better value over the long haul. Regardless, I would wait until these stocks bottom out. Nobody knows what the basement price for utility stocks is. I wish I could tell you. You just need to watch key players and see if they dip past their 52-week lows.
Moreover, you should only look at certain key players. Look at market dominance, low debt, and high dividends. Once they get to a very low price per earnings share ratio, that would be a good time to buy in drips and drabs. The reason why you should buy in small batches is because the price might dip even lower.
Buy small at first and wait for it to drop even further. Then buy a larger chunk and wait. If it drops even further, buy some more. The whole point here is to buy a lot at the bottom so that your overall expenditures for that particular stock are very low. It will only take a decent uptick for the stock to make you a hefty profit.
Keep in mind that utility stocks are safety stocks. If the economy tanks or there is a massive correction, investors often flee to other investment classes. However, once they come back, utilities are a favorite. There is definitely a lot of upswing potential here.
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