The US utilities sector is up a whopping 28% year-to-date – making it the top performing sector of 2014. The P/E ratio for the Utilities sector is 18.8 vs. the P/E for the S&P 500 at 18.5. As you can see on the charts above (daily) and below (weekly), RSI is overbought, so is stochastics. The index has blown through its upper Bollinger band on both charts. This sector has gotten goofy-overbought. I’m not going out on a limb here if I predict at least a near termed pullback –soon!
Meanwhile, the Canadian utilities sector continues to yo-yo erratically and violently between the high $14’s and high $15’s – per the BMO ETF. While not so obviously overbought from a technical perspective, this ETF is nearing the top of the trading range. Canadian utilities are trading at a trailing PE of about 10 points higher than the US side – making them even more expensive. The dividend yield on both the US utility ETF and the Canadian utilities ETF s about the same–around 4%.
All in, nothing would entice me to take new positions in the utilities sector on either side of the border. In fact, investors who are not so enthralled by the high dividend might want to consider reducing exposure to this sector.
To all of my readers – thank you for following this blog (if you don’t get regular notices for the blog, be sure to follow us on twitter @ValueTrend).
Happy New Year to all, and I will look forward to another exciting year of trading and commenting on the markets in 2015!