Time to Buy Utility Stocks
NEW YORK (TheStreet) - With the overall stock market overvalued fundamentally and overbought technically it's time to switch some equity assets into the more defensive but buy-rated names in the Dow Jones Utility Average
In a momentum market investors have been shying away from dividend stocks, but in my judgment it's time to invest for the dividend income that utility stocks provide. The Dow Utility Average ended Tuesday up 6.5% lagging the S&P 500 which is up 26.4%. The utilities sector is 13.5% overvalued with 12 of 16 sectors overvalued by 24% to 38%.
I give the utilities sector an overweight rating as 90.5% of the 211 stocks in this sector have buy or strong buy ratings according to www.ValuEngine.com. At ValuEngine we show that 97 stocks have strong buy ratings and 52 are in the utilities sector.
Among the 13 stocks in today's post, three are undervalued by 0.5%, 3.1% and 14.1%. Overall 51.2% of all stocks are overvalued by 20% or more but only two of the components of the Dow Utility Average are overvalued by 24.9% and 30.5%. Five stocks in today's post have losses of 2.2% to 22.5% over the last 12 months, while the other eight are up 1.9% to 35.2% over the last 12 months. The reversion to the mean should help utilities as 10 of the 13 are below their 200-day simple moving averages.
American Electric Power