Russell 1000 Sector Attributes — Utilities Are Unattractive
Richard Shaw | Jan 20, 2013 12:43AM ET
The yield on utilities is at the 20-year average, while the other sectors are at yields higher than the 20-year average. When current yields are higher than average yields, one prospect is for prices to rise to “normalize” the yield. Utilities have no indicated price appreciation potential by that logic.
The telecommunications and utilities sectors each have trailing P/E ratios higher than their 20-year average. The other sectors have lower P/E ratios than their average. Lower P/E ratios suggest the possibility of a price multiple expansion for a price rise. Telecomm and utilities do not provide good prospects on that dimension.
On a forward P/E basis versus the 15-year average of forward estimates, all sectors other than utilities suggest the possibility of multiple expansion to historic average levels.
Healthcare, consumer staples, telecomm and utilities have the lowest Beta to the S&P 500.
Relative to the S&P 500, proxy (SPY), the Russell 1000 Growth, proxy (IWF) has a lower exposure to utilities, telecomm, energy and financials, and a much higher exposure to technology. The Russell 1000 Value, proxy (IWD) has a higher exposure to financials, energy and utilities; and a lower exposure to technology, industrials, consumer discretionary, and consumer staples.
This data is from JP Morgan Asset Management.
Get The News You Want
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.