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Putnam Utilities Growth & Income Flies High Then Plunges

Putnam Utilities Growth & Income's new skipper adds growth around the edges.

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It has been a couple of quarters of Jekyll and Hyde-like performance for Putnam Utilities Growth & Income Fund (PUGIX). The fund outperformed its category average by a fairly wide margin in the fourth quarter of 2000, as its portfolio, heavy with traditional utilities, kept soaring higher. It also ended the year in the utilities category's top quartile. However, the portfolio has come crashing to earth so far in 2001. Its 12.9% loss through March 20, 2001, puts it in the group's bottom quartile. Many of those utility stocks that did so well last year have pulled back. For example, Progress Energy (PGN), a highflier last year, is suffering in 2001. Also, the fund has maintained a fully invested stance, which hasn't helped as the stock market has continued to head south. Other funds, like Merrill Lynch Utilities & Telecommunications (MAGUX), have found respite in bonds and cash.

The fund recently changed managers. Jeanne Mockard left in January 2001 and was replaced by Michael Yogg and Kevin Divney. Divney says that the new duo won't be changing the fund's goal of being a conservative utilities fund that emphasizes yield. However, he has been adding some racier stocks that he thinks have strong earnings growth and solid market share in their industries. For instance, he has added to the fund's position in Qwest (Q), a networking firm that Divney says will be a dominant player as an Internet-service provider. Meanwhile, he has dramatically reduced the fund's exposure to embattled California utility Edison (EIX), because he prefers energy companies that are more flexible in the areas that they can serve. Thus, he has been adding to independent power producers like Duke (DUK) and Dynegy (DYN).

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Catherine Hickey does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.