Utility funds had an excellent week. The average utility sector fund we track climbed 1.90% for the five trading days ending Thursday, April 17. Favorable weather and new North American natural gas finds may have been contributing factors.
More likely, the gains are traced to the deregulated, independent power-generation companies like
, which charge for wholesale electricity at what the market will bear. These prices are set from the more-expensive natural gas-generated electricity. They then produce as much cheaper coal- or nuclear-based electricity as they can in order to profit from the cost difference.
The best-performing utility fund this week is the
Ultra Utilities ProShares
, gaining 6.96%. The fund is 200% leveraged to the Dow Jones U.S. Utilities Index. The second-place
ProFunds Utilities UltraSector ProFund
tracks the same index, but at 150% leverage. The four largest holdings are
Fidelity Select Utilities Growth Fund
ranks third on our best-performer list. This fund has rebounded from last month's lows but is still down over the last 12 months. One of the fund's holdings,
Public Service Enterprise Group
, surged on news of approval from the Federal Energy Regulatory Commission for higher incentive profits for building a $1 billion power line from Pennsylvania to New Jersey.
This week, the worst-performing utility fund is the
UltraShort Utilities ProShares
, which sank 6.62% for the five trading days. This fund tracks the Dow Jones U.S. Utilities Index with double negative leverage. The index members gaining the most this week include: NRG Energy Inc, up 7.03%;
, up 6.38%; Public Service Enterprise Group Inc, up 6.18%;
, up 5.98%; and
, up 5.88%.
Making its second consecutive appearance as the second-worst-performing utility is the
Evergreen Utilities and High Income Fund
, slipping 1.35%. Eight of this fund's 10 underperforming positions are in the telecommunications sector.
Returns of negative 5.29% from
, negative 3.51% from
, negative 1.85% from
and negative 1.65% from
offset the positive water and electric utility stock returns.
BT was likely hurt by expectations that certain mobile-phone fees are expected to decline.
Plus, AT&T is cutting 4,650 workers to trim overlapping costs after several large acquisitions. Employees servicing the home phone-line business are to bear the brunt of the job losses after 1.6 million AT&T residential-line customers disconnected in favor of cable and wireless mobile phones.
In the near future, in a thought just in time for
, electric utilities will have to plan for increased nighttime kilowatt-hour usage as residents charge up their plug-in electric car batteries and top off their home-storage batteries.
For an explanation of our ratings,
Kevin Baker became the senior financial analyst for TSC Ratings upon the August 2006 acquisition of Weiss Ratings by TheStreet.com, covering mutual funds. He joined the Weiss Group in 1997 as a banking and brokerage analyst. In 1999, he created the Weiss Group's first ratings to gauge the level of risk in U.S. equities. Baker received a B.S. degree in management from Rensselaer Polytechnic Institute and an M.B.A. with a finance specialization from Nova Southeastern University.