We think it’s time to fade the utility sector – BTIG

BTIG’s Jonathan Krinsky made a case that the S&P 500 utility sector may be poised for a downward correction.

“We think it’s time to fade the utility sector,” Krinsky said in an investor note on Monday.

“XLU has been rising on a perfect trend since the summer, but it looks poised to break this uptrend soon. XLU has seen a -16%, -11%, and -7% correction over the last year. It looks ready for another similar correction in the 7-10% range,” Krinsky added.

Utility stocks in general have seen significant gains this year, largely due to their perception as an artificial intelligence (AI) play. The demand for AI processes has led to a need for huge amounts of data center power, and that is where the utility companies come in.

BTIG also spotlighted that the XLU ETF is 13.7% above its current 200-day moving average, which is the fund’s widest spread since 2003.

The XLU ETF aims to provide exposure to companies from the electric utilities, water utilities, multi-utilities, independent power, and renewable electricity producers and is higher on the year by 25.9%.

For investors that are looking to further track moves around the complete utility sector of the economy, they may choose to further analyze both utilities-based stocks and exchange-traded funds for further details. Outlined below are some popular names worth mentioning.

Utilities Stocks: NextEra Energy (NEE), Southern Company (SO), Duke Energy (DUK), Constellation Energy Corporation (CEG), American Electric Power Company (AEP), Dominion Energy (D), and Vistra Corp. (VST).

Utilities ETFs: Select Sector SPDR Fund ETF (NYSEARCA:XLU), Vanguard Utilities Index Fund ETF (VPU), Fidelity MSCI Utilities Index ETF (FUTY), iShares U.S. Utilities ETF (IDU), and the Invesco S&P 500 Equal Weight Utilities ETF (RSPU).