InvestingDaily.com

Account Information

  • My Account

    Manage all your subscriptions, update your address, email preferences and change your password.

  • Help Center

    Get answers to common service questions, ask the analyst or contact our customer service department.

  • My Stock Talk Profile

    Update your stock talk name and/or picture.



Close
FEATURED STRATEGY

$1,230 in Instant Income?

$1,230 in Instant Income?Our top income expert recently pulled the wraps off his breakthrough moneymaking technique. And he proved beyond a shadow of a doubt how you can use it to generate instant cash payouts of up to $1,230 (or more). Over and over again. But then he took things a big step further and guaranteed you can make $1 million by following his program. And the second he did, our phones went nuts! Space is limited — get the details here.

 

 

Special Situations for Undervalued Utilities

By Richard Stavros on May 20, 2016

The biggest challenge today for income investors is finding reasonably priced investments. Thanks to their safe-haven status, most dividend stocks have become overvalued following the market’s tumult earlier this year.

The question most often asked at our Wealth Society’s annual summit, held last week in Las Vegas, was whether there are still undervalued opportunities in the utility space.

While most utility stocks are pretty expensive at the moment, there are two macro events over the next month that could create buying opportunities: 1) a potential rate hike by the U.S. Federal Reserve; and 2) the U.K.’s possible exit, or Brexit, from the European Union.

At Utility Forecaster, we’ve written a number of times about how a more hawkish Fed could help bring utility valuations back to Earth. And at our sister publication, Global Income Edge, we’ve noted that uncertainty over the so-called Brexit could also create buying opportunities for value-conscious income investors.

The U.S. central bank’s minutes from its April policy meeting were released on Wednesday, revealing a more hawkish outlook on rates than the market had expected. That could mean a June rate hike is on the table, which could cause utility stocks to sell off.

We got a small taste of that during Wednesday’s afternoon market session, when the Dow Jones Utilities Average quickly dropped 2% after the minutes were published. The utilities benchmark has since recovered somewhat.

Last year offered plenty of evidence that mere Fed jawboning can still cause dividend stocks to sell off. The utility sector suffered three Fed-induced corrections in 2015, and only one of those involved an actual rate hike. All three corrections turned out to be good opportunities to pick up some of our favorite stocks.

Fed policymakers indicated that a June interest-rate increase would be likely if the economy continues to improve, boosting market expectations they will act next month. Traders adjusted their bets accordingly, with the probability of a June rate hike jumping as high as 33% at one point from just 5%, according to futures data aggregated by Bloomberg. It has since declined to 28%.

Regardless of what the central bank does in the near term, we continue to believe that rates will stay lower for longer, and that utility stocks will continue to be attractive amid weak growth in both the U.S. and overseas markets.

Then there’s the possibility that a Brexit could roil global markets, especially since some observers worry it could presage the fall of the Continent’s currency union.

But we’ve seen this show before. Last year, Greece’s potential exit from the E.U. sparked market selloffs that created buying opportunities.

Although polls suggest that British voters will choose to remain in the E.U., as we get closer to the country’s referendum on June 23, there could be more downward volatility. That could be another chance to pick up some of our top stocks.

For subscribers, we highlight two favorites that could drop to more attractive levels over the next several weeks.


You might also enjoy…

 

Obscure Tax Law Forces This Company to Pay Out 90% of its Profits

A 50-year-old loophole is forcing one company to pay out $9 of every $10 it makes from ironclad contracts with the U.S. Government.

In fact, over the past seven years, it’s made payments ranging from a few dollars… to tens of thousands of dollars… 30 times. Without a single cut! 

Most folks don’t even know this company exists, but the ones that do are making a mint.

Like Ted B., who’s set to receive a check for $1,096 just a few days from now.

Merrill H., a 58-year-old from New York, has collected over $3,385 so far. 

And retirees Beth and Terry P. have raked in $16,555.

I’ve put together a special report that will give you all the details, including simple instructions on how to get your name on the payout list before the next cutoff date.

You can get your copy here.

Stock Talk — Post a comment Comment Guidelines

Our Stock Talk section is reserved for productive dialogue pertaining to the content and portfolio recommendations of this service. We reserve the right to remove any comments we feel do not benefit other readers. If you have a general investment comment not related to this article, please post to our Stock Talk page. If you have a personal question about your subscription or need technical help, please contact our customer service team. And if you have any success stories to share with our analysts, they’re always happy to hear them. Note that we may use your kind words in our promotional materials. Thank you.

You must be logged in to post to Stock Talk OR create an account.

Create a new Investing Daily account

  • - OR -

* Investing Daily will use any information you provide in a manner consistent with our Privacy Policy. Your email address is used for account verification and will remain private.