Ronald Sorenson, manager of the
Reaves Utility Income Fund
, says he's focusing on utilities with the best potential to benefit from low interest rates and economic stimulus programs. They include
American Water Works
"Electric utilities, the largest concentration in our portfolio, came roaring back last week, and telephones did well too," Sorenson says. His closed end fund gained 12% in the five trading days ending Thursday, topping the average utility fund, which rose 8.2%.
Sorenson's firm, W.H. Reaves & Co., founded by William Reaves in 1961, specializes in utility research. His
invests in telephone, gas, electric and water companies, which continue to boost earnings and
"Which would you rather have, shares of AT&T, which raised its dividend twice in the last year, has huge cash flow and an attractive 6.3% dividend yield or 10-year Treasury bonds yielding 2.6%?" he says.
Sorenson says the telecommunications provider might benefit from the Federal Reserve's efforts to keep interest rates low. The more interest rates decline, the better utilities look.
He has also been targeting companies poised to benefit from President Barack Obama's economic stimulus plan. The effort aims to improve the country's power and water infrastructure, and increase access to broadband communications services. He
of electricity provider ITC Holdings, which rose 13% last week, and American Water Works, a water utility that surged 10%.
The Reaves Utility Income Fund's best-performing holding last week,
, sailed ahead by 22%. General Maritime, which transports crude oil, will likely generate sizable dividends in the coming years, Sorenson says.
The Dow Jones Utilities Average rallied last week, climbing 9.7%, tripling the rebound of the Dow Jones Industrial Average, which tracks 30 of the country's biggest companies.
ProShares Ultra Utilities Fund
ProFunds Utilities UltraSector ProFund
were the best-performing funds of the group with returns of 22% and 16%, respectively. They're designed to track the performance of the Dow Jones U.S. Utilities Index by 200% and 150%. A team led by William Seale and George Foster manages the funds.
The utility index's best-performing holding,
, climbed 33%. Other large gainers include
, which rose 31%, and
, up 21%
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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.