None of Your Mutual Funds Are Making Money
BOSTON (TheStreet) -- U.S. stock mutual funds that invest in a diverse array of companies turned in a shameful performance last quarter, as none -- that's right, none -- made money.
Among funds that buy mainly U.S. stocks and use no leverage or short positions, only three sector-specific funds eked out gains from the beginning of July to the end of September, according to fund-research firm Morningstar: Icon Telecommunications & Utilities (ICTUX), up 1.9%; Franklin Utilities (FKUTX), up 1.7%; and Invesco Utilities Investor (FSTUX), up 0.3%.
The stock-market rout gathered steam last month on concern the U.S. economy is slipping into another recession and Europe's debt burden will sink more banks and lead to a further decline in global corporate profits. In September, materials stocks fell the most, by 13%, followed by energy, with a 10% drop, and financial services, which tumbled 8.3%, according to Capital IQ. Utilities shares were the sole sector to rise, by 1%.
The utility stocks that make up the winning funds last quarter have historically been categorized as the turtles of equity investing, due to their slow, albeit steady, share-price returns.But now they're seen as attractive investments for those seeking dividends and the preservation of money in volatile markets. Here's a snapshot of the five companies that were the top gainers in the utility sector in the third quarter: Progress Energy (PGN), one of the nation's largest regulated utilities, is up 20% this year, including 8% in the third quarter. It has a projected dividend yield of 4.75%. Progress Energy is a holding company with a market value of $15 billion that provides electricity generation, transmission, and distribution throughout the Southeast, principally in North Carolina, South Carolina and Florida. Progress and Duke Energy (DUK) have announced plans to merge in a $14 billion deal that will create the largest electric power utility in the U.S. They aim to close the deal by year-end. The Duke merger, which faces several regulatory hurdles before it gets approved, would give Progress' shareholders an immediate premium to the pre-deal stock price and a 3% dividend increase. But the company has agreed to make $650 million in rate concessions to its customers through 2016. Analysts are unanimous on their view of the stock, giving it 15 "hold" ratings, according to TheStreet Ratings.
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