Mild weather, ample supplies of natural gas and a correction in crude oil prices gave utility funds a boost this past week.
These funds, which hold stocks, preferred stocks and bonds of utility companies, and also benefitted from expectations that the
could cut rates again.
Falling interest rates tend to boost prices of securities that pay fixed rates of return, by making their rates appear relatively more attractive.
Excluding the funds shorting the sector, the average utility fund tracked by TheStreet.com Ratings rose 2.23% in the five trading days following the Thanksgiving holiday.
While this return trailed the 3.79% for the
and the 4.07% for the
Dow Jones Industrial Average
, it was a good week for utility funds.
The best performing fund this week is the
Evergreen Utilities and High Income Fund (ERH), a closed-end fund, which returned 8.07%. As of Aug. 31, shares of
accounted for 62.5% of assets.
The stock climbed 5.41% this week, benefitting from the expected commencement of a $1 billion share repurchase program.
The buyback is part of a plan to distribute $4.6 billion in excess cash that was announced Nov. 9.
Four of the top 10 performers target water utilities. The
PowerShares Global Water Portfolio
was the best of the quartet, returning 6.92%.
The fund's second largest holding, Singapore's Hyflux Ltd, jumped 16.15% on a steady pipeline of Chinese water projects and plans to raise $162 million to continue the company's expansion in China, India, the Middle East and North Africa.
The third-place fund,
Macquarie/First Trust Global Infra/Util Div & Inc (MFD), added 6.92%.
The fund's two best-performing holdings,
Severn Trent PLC
, up 7.95%, and
Pennon Group PLC
, up 6.17%, both reported higher first half of 2007 earnings citing the ability to raise prices for water and sewage services in Britain.
Gabelli Global Utility & Income Trust (GLU) also had a standout week as its holding of Biffa PLC, a U.K. trash collector, skyrocketed 22.46% on a second private-equity buyout offer after the first was rejected.
Millicom International Cellular SA
, rose 15.96% amid hopes the company can gain market share in both Latin America and Africa.
The worst performing utility fund this week is the
UltraShort Utilities ProShares
. This ETF slipped 2.69% while tracking the daily returns of twice the opposite performance of the Dow Jones U.S. Utilities Index. (The positive version of this negatively leveraged fund is the
Ultra Utilities ProShares
. It returned 3.03% for the period, just missing the cutoff for the top 10 best performers.)
The member of the Dow Jones U.S. Utilities Index having the best week was
. The company'sshares rose 7.76% for the five trading days ended Thursday, in advance of the big news that the Nuclear Regulatory Commission accepted its application to build two nuclear power plants as part of the company's South Texas Project in Bay City, Texas.
Construction of the two new plants will take approximately five years, beginning in 2010, following design work of
. The Nuclear Regulatory Commission expects to review at least 32 more reactor applications over the next two years.
here for an explanation of our ratings.
Breaking the nuclear regulatory logjam is an important step in the United States' efforts to head towards energy independence. Without cheaper sources of energy, we may get to the point where mandates for energy conservation become unnecessarily harsh. A University of Alberta study showed 30% of Canadian households have "beer fridges". It bemoaned that these secondary refrigerators may be less efficient than newer models. In my opinion, attacking a guy's right to a "beer fridge" is going too far.
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.