Best And Worst Q3 2019: Utilities ETFs And Mutual Funds

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Includes: BULIX, JHMU, RYUTX
by: David Trainer
Summary

The Utilities sector ranks tenth in Q3'19.

Based on an aggregation of ratings of the 70 stocks in the Utilities sector.

BULIX is our top-rated Utilities sector mutual fund.

The Utilities sector ranks tenth out of the 11 sectors as detailed in our Q3'19 Sector Ratings for ETFs and Mutual Funds report. Last quarter, the Utilities sector ranked tenth. It gets our Unattractive rating, which is based on an aggregation of ratings of the 70 stocks in the Utilities sector. See a recap of our Q2'19 Sector Ratings here.

Figures 1 and 2 show the five best and worst rated ETFs and mutual funds in the sector. Not all Utilities sector ETFs and mutual funds are created the same. The number of holdings varies widely (from 23 to 223). This variation creates drastically different investment implications and, therefore, ratings.

Investors should not buy any Utilities ETFs or mutual funds because none get an Attractive-or-better rating. If you must have exposure to this sector, you should buy a basket of Attractive-or-better rated stocks and avoid paying undeserved fund fees. Active management has a long history of not paying off.

Our Robo-Analyst technology[1] empowers our unique ETF and mutual fund rating methodology, which leverages our rigorous analysis of each fund’s holdings.[2] We think advisors and investors focused on prudent investment decisions should include analysis of fund holdings in their research process for ETFs and mutual funds.

Figure 1: ETFs with the Best and Worst Ratings

* Best ETFs exclude ETFs with TNAs less than $100 million for inadequate liquidity.

Sources: New Constructs, LLC and company filings

Figure 2: Mutual Funds with the Best and Worst Ratings

* Best mutual funds exclude funds with TNAs less than $100 million for inadequate liquidity.

Sources: New Constructs, LLC and company filings

BULIX is the top-rated Utilities mutual fund. There are no ETFs that receive a Neutral-or-better rating. BULIX earns a Neutral rating.

JHMU is the worst rated Utilities ETF and RYUTX is the worst Utilities mutual fund. They both earn a Very Unattractive rating.

Seventy stocks of the 2,800-plus we cover are classified as Utilities stocks.

The Danger Within

Buying a fund without analyzing its holdings is like buying a stock without analyzing its business and finances. Put another way, research on fund holdings is necessary due diligence because a fund’s performance is only as good as its holdings’ performance. Don’t just take our word for it, see what Barron’s says on this matter.

Performance of Holdings = Performance of Fund

Analyzing each holding within funds is no small task. Our Robo-Analyst technology enables us to perform this diligence with scale and provide the research needed to fulfill the fiduciary duty of care. More of the biggest names in the financial industry (see At BlackRock, Machines Are Rising Over Managers to Pick Stocks) are now embracing technology to leverage machines in the investment research process. Technology may be the only solution to the dual mandate for research: Cut costs and fulfill the fiduciary duty of care. Investors, clients, advisors and analysts deserve the latest in technology to get the diligence required to make prudent investment decisions.

Figures 3 and 4 show the rating landscape of all Utilities ETFs and mutual funds.

Figure 3: Separating the Best ETFs From the Worst ETFs

Sources: New Constructs, LLC and company filings

Figure 4: Separating the Best Mutual Funds from the Worst Mutual Funds

Sources: New Constructs, LLC and company filings

This article originally published on July 11, 2019.

Disclosure: David Trainer, Peter Apockotos, and Kyle Guske receive no compensation to write about any specific stock, sector or theme.

[1] Harvard Business School features the powerful impact of our research automation technology in the case New Constructs: Disrupting Fundamental Analysis with Robo-Analysts.

[2] This paper compares our analytics on a mega cap company to other major providers. The Appendix details exactly how we stack up.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.