Q: Hi Peter, Ryan, and Team,
US bond yields have recently increased quite substantially due to the self-inflicted chaos caused by Trump. Canadian yields have also risen, but thankfully not as much as in the US. Even dividend payers like Fortis, Emera, and Hydro One have recently been under pressure.
Portfolio Analytics tells me that our Utilities exposure needs to be increased. Since the three stocks referenced are “on sale”, do you think that this could be an opportune time to buy some FTS, EMA, or H? We already have a large holding of FTS, but I’m intrigued by the recent momentum of Emera.
Your thoughts on this strategy will, as always, be of help as we try to navigate through this truly bizarre period.
US bond yields have recently increased quite substantially due to the self-inflicted chaos caused by Trump. Canadian yields have also risen, but thankfully not as much as in the US. Even dividend payers like Fortis, Emera, and Hydro One have recently been under pressure.
Portfolio Analytics tells me that our Utilities exposure needs to be increased. Since the three stocks referenced are “on sale”, do you think that this could be an opportune time to buy some FTS, EMA, or H? We already have a large holding of FTS, but I’m intrigued by the recent momentum of Emera.
Your thoughts on this strategy will, as always, be of help as we try to navigate through this truly bizarre period.
5i Research Answer:
We would focus first on sector allocation, so timing we think should lower down on the decision tree. Utilities are sensitive to rates, of course, but we think the timing should be OK. There is a balance between fear of recession and fear of inflation right now. Positive tariff news should help on the inflation concern, though we would note that market yields still rose on yesterday's news. EMA has been strong, but is still off ~$6 from a week ago. All are up on the year, and in fact EMA is up the most but is still the cheapest on pure P/E valuation (17X vs 18X for FTS and 23X for H). We would be comfortable buying any of these today.