XLU: Higher Rates Hurt

Ricardo Fernandez
2.57K Followers

Summary

  • Utilities sector is no longer boring, predictable, or safe due to climate change and energy transition.
  • Utility stocks still have room for a price correction to meet risk-free rates.
  • XLU ETF portfolio is trading at a high P/E ratio and has escalating debt risks, making it a sell recommendation.
Coal power plant and environmental pollution

baranozdemir

Summary

Utilities have been classified as boring, predictable, and safe stocks with regular dividend steam. Only three of the adjectives apply in today’s market, gone are boring, predictable, and safe thanks in great part to climate change and the policies to reach net zero i.e., de-carbonization and

This article was written by

2.57K Followers
Experience is difficult to learn. After 30 plus years of critically analyzing the nuts and bolts of businesses as diverse as airlines, oil, retail, mining to fintech and ecommerce plus the macro, monetary and political drivers. I continue to immensely enjoy learning and applying my experience to unravel, comprehend and benefit from new ideas, technology, innovation and business models. In addition, living through multiple crises, tequila, Asia, dotcom, 9/11, the great recession and the Covid19 pandemia, plus a stint at entrepreneurialism (Export, Factoring and Printing) provides for an extraordinary base of experience to be applied across multiple disciplines.

Analyst’s Disclosure:I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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