Q: Utilities generally continue to take it on the chin. I realize- high capital, prolonged elevated rates etc. is this a good time to add to stakes here or not? Is this part of a longer term concern?
5i Research Answer:
We would not say there is a long-term concern with utilities as high/rising rates have been the main negative catalyst. As rates stabilize and start to drop, there is strong growth potential for utilities but the question is how long will that take to materialize and what will the fallout of the high rates be on a company level. The apparent outlook is that rates have stabilized albeit at a high level, so utilities could continue start to experience a positive shift. This is likely a lowpoint for utilities and we are comfortable starting a position here for sector exposure. The sector is also likely being used as a source of cash for more exciting sectors, but this of course can be temporary.