Large Utilities Set to Outperform Smaller Peers
Regulated utilities could be hit hard by inflation, while diversified firms have long-term value that the market refuses to recognize.
The utility sector continues to be a tale of two divergent groups. The fully regulated utilities continue to climb as investors seek yield and safety in an ultralow interest-rate environment. Electric demand climbed 1% in the second quarter year over year, and industrial demand continues to climb back from its 2009 lows, providing fundamental stability. But if rates turn, inflation kicks in, or the economy falls into another recession, these utilities have a long way to fall.
Travis Miller does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.