Leader and Laggers: Energy performing well, Telecom is draggingSubmitted by Castlebar Asset Management on June 24th, 2014
Energy stocks are on a roll. This quarter the energy sector has doubled up on the next best sector, technology. Oil prices have been the primary catalyst. Geopolitical issues in Iraqi as well as an improving global economic landscape have aided oil prices. Valuations on energy stocks were reasonable heading into this quarter which provided an additional catalyst for buyers.
Telecom stocks have been the lager so far this quarter. Sprint (S), Verizon (VZ) and AT&T (T) have all underperformed the broader market this quarter and year. The industry is at the final stages of consolidation and there is a high degree of integration risk to make these deals work.
Utilities are still the top dog year to date gaining 14%. Utilities are normally counter cyclical and to see them outperforming in the current steadily rising market is a little unusual. They are benefiting from low interest rates which help keep their borrowing costs low. The Utilities Select Sector SPDR ETF (XLU) has a dividend yield of 3.4%, which is 0.8% higher than a 10-year government bond yield.
Disclaimer: The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. Castlebar owns Verizon and Sprint shares for clients. We may change our holdings at any time.