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After the mini market crash of late July, early August, utilities ETFs enjoyed a bounce that lasted up until the end of the year. Since the beginning of 2012, however, utilities have been out of favor, moving solidly into negative ground. As of February 15, 2012, the three biggest utilities ETFs are down about -3.5% while SPY is up over 7%. This 10% differential suggests that utilities ETFs may be selling at a significant discount relative to the market. Does that mean it's time to buy?

Let's have a look at the data for the five largest utilities ETFs, which constitute about 98% of the utilities ETF market (assets from ETFdb.com, quotes from Morningstar.com, RSI from StockCharts.com).

SYMB

ASSETS ($M)

CLOSE

2/15

52WK

HIGH

OFF

HIGH

2011

Q4

2012

YTD

RSI

YIELD

XLU

6,549

34.70

36.27

-4.3%

8.18%

-3.56%

46.63

3.95

VPU

1,032

74.18

77.57

-4.4%

8.57%

-3.52%

46.07

3.59

IDU

691

85.43

89.18

-4.2%

8.86%

-3.27%

46.78

3.40

FXU

381

17.64

18.67

-5.5%

7.65%

-1.62%

50.85

1.89

JXI

253

41.55

48.40

-14.2%

3.25%

-0.84%

48.28

4.74

The three largest ETFs (XLU, VPU, and IDU) track broad U.S. utilities indexes: the S&P Utilities Select Sector Index, the MSCI U.S. Investable Market Utilities 25/50 Index, and the Dow Jones U.S. Utilities Index. FXU tracks an enhanced utilities index derived from the Russell 1000 index. JXI tracks the S&P Global 1200 Utilities Sector Index. All five show broadly similar market action over the last six months, with individual variations.

For the three biggest ETFs, the results are pretty much the same: all enjoyed a bounce of more than 8% in 2011Q4, then declined over 3% YTD in 2012, are more than 4% off their 52-week highs, have a RSI in the mid 40s, and are yielding between 3% and 4%.

FXU tracks an alternative U.S. index and thus shows a somewhat different pattern: up over 7% in 2011Q4, down less than 2% YTD, more than 5% off its 52-week high, RSI over 50, and a yield of less than 2%.

JXI tracks a global utilities index and shows more variation on the pattern: up just over 3% in 2011Q4, down less than 1% YTD, more than 14% off its 52-week high, RSI in the high 40s, yield of well over 4%.

All are selling at a significant discount to SPY, but are they worth buying? I don't think so. Despite their recent declines, none has retraced even 50% of the 2011Q4 run-up. None is more than 5.5% off its 52-week high. None has an RSI below 46. All are trading near their 50-week moving averages and, with the exception of JXI, above their 200-week moving averages. If the broad market sells off from its current level, utilities may follow it lower.

Although JXI has a somewhat enticing yield, its recent market action has been uninspiring. FXU's yield is too low to be tempting. XLU, VPU, and IDU will look better when their yields move above 4%. For the time being I'm standing pat.

Source: Utilities ETFs Selling At A Discount