Another Smart Money Manager is Bearish on Utilities (IDU, UTH, XLU)

Includes: IDU, UTH, XLU
by: David Jackson

This weekend's Barron's interview was with Robert Marcin and Steve Epstein, principals of long-short hedge fund Defiance Asset Management. Marcin and Epstein are value investors; their long portfolio, for example, has has a forward P/E of 10. The interview avoids their short positions due to advice from their lawyer, but ends with the following two lines:

What don't you like?

Marcin: There is a fair amount of the stock market that we think is a better sell than a buy today. We think the average company growing revenues at 6% to 8% and trading at 17 to 19 times earnings is a better short than long. Electric utilities are one of the most overpriced sectors of the market.

The easiest way for most investors to follow Marcin's advice is to short one of the utility ETFs, IDU, UTH or XLU. While you have to pay the dividends on the short position, the expense ratio of the ETFs work in your favor, as the expense ratios are deducted from the dividends you have to pay.

The full Barron's interview is here (paid subscription reqired).


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