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Though utilities have proven to be the most resilient in the recent market downturn, some fared better than others. Which utility stocks are most resistant to down markets?

To answer this question, utility stocks were screened and sorted based on their performances over week-long downturn that lasted through August 9th, 2011.* Over the course of this week, the S&P500 index dropped over 13.3% while the mean drop for a broader sample of 4541 equities was 10.1%, providing an opportunity to observe sector differences during extreme market drops. **

Industry

Mean Gain (Loss)

Mean Beta

Mean Market Cap

Water Utilities

2.1%

0.48

983.81

Diversified Utilities

-4.4%

0.58

5,393.92

All Utility Industries

-6.7%

0.72

5,387.96

Gas Utilities

-7.7%

0.77

4,304.33

Electric Utilities

-8.9%

0.81

6,529.46

Foreign Utilities

-10.3%

0.76

11,017.86

The ranking of industry performance follows differences in beta. This makes sense since beta is a measure of a stock’s past co-movement with the market.

We can visualize the performance of different utility industries as a plot of weekly performance as a function of beta:

click to enlarge
Individual utility stock performance vs. beta
There is a clear negative dependence on beta, though these points don’t form a straight line. Stocks above the trend have delivered excess returns for the amount of beta risk that is associated with firms in this sector. The extra return above the trend is excess performance, which could be loosely connected*** to market cap or individual industries:

Utility Industry

Mean Gain (Loss)

Mean Market Cap

($ Millions)

Water Utilities

2.1%

984

Diversified Utilities

-4.2%

5394

All Utilities

-6.1%

5388

Gas Utilities

-7.0%

4304

Electric Utilities

-8.1%

6529

Foreign Utilities

-10.3%

11018

So which utilities had the most excess return? Here is the list:

Ticker

Company

Industry

Gain (Loss)

Excess Performance

Beta

Market Cap

CTWS

Connecticut Water Service Inc.

Water Utilities

7.93%

7.9%

0.42

239.25

CPK

Chesapeake Utilities Corporation

Gas Utilities

5.49%

5.5%

0.4

396.13

OTTR

Otter Tail Corporation

Diversified Utilities

5.00%

5.0%

1.11

773.13

CWCO

Consolidated Water Co. Ltd.

Water Utilities

4.24%

4.2%

1.43

128.86

UTL

Unitil Corp.

Diversified Utilities

4.21%

4.2%

0.31

292.43

YORW

York Water Co.

Water Utilities

4.03%

4.0%

0.46

219.93

AWR

American States Water Company

Water Utilities

2.37%

2.4%

0.36

645.64

ARTNA

Artesian Resources Corp.

Water Utilities

1.82%

1.8%

0.38

139.93

MSEX

Middlesex Water Co.

Water Utilities

1.43%

1.4%

0.4

288.5

AWK

American Water Works Company, Inc.

Water Utilities

0.76%

0.8%

0.38

4886.28

CWT

California Water Service Group

Water Utilities

0.55%

0.6%

0.29

766.11

NJR

New Jersey Resources Corp.

Gas Utilities

0.53%

0.5%

0.19

1799.32

SJW

SJW Corp.

Water Utilities

0.51%

0.5%

0.63

435.33

PNNW

Pennichuck Corp.

Water Utilities

0.18%

0.2%

0.36

133.47

DPL

DPL Inc.

Diversified Utilities

0.13%

0.1%

0.6

3554.84

*Stocks with volumes under 5000 were excluded from the screen, since low liquidity makes them hard to trade. ETFs and other funds were also excluded.

**Mean sector performance, mean market cap, and mean beta were calculated from an equal-weighted average of stocks in that sector.

***A multiple regression of individual utility performance shows that dependence on beta is significant (t stat -9.1) but dependence on market cap was not shown to be significant (t stat -0.99).

Source: Which Utilities Fared Best in the Market Drop?