iShares U.S. Utilities ETF (IDU) seeks to track the investment results of an index composed of U.S. equities in the utility sector. The ETF has gained 6.6% over the past year.
The stock market has suffered since the beginning of the year due to various headwinds, such as supply chain disruptions, surging inflation, and the Fed’s tightening monetary policy. These factors have increased the odds of the U.S. economy tipping into a recession.
The Bureau of Labor Statistics' Consumer Price Index (CPI) reflected a year-over-year increase of 9.1% last month, up from the prior 40-year high of 8.6% in May and above the 8.8% Dow Jones estimate.
Historically, the utility sector has remained resilient amid economic downturns due to the inelastic nature of its services. Therefore, investors consider this sector defensive in troubled times. With solid exposure to the utility sector, IDU could be an excellent investment amid the uncertainties surrounding the market and the economy.
Here are the key facts that make IDU a solid play right now:
The fund has approximately $1.01 billion in assets under management (AUM). IDU has an expense ratio of 0.41% versus the category average of 0.42%. Over the past month, the ETF's net fund flows were $15.64 million. The fund has a five-year monthly beta of 0.55, indicating less volatility than the broader market. Its NAV stands at $85.79.
The fund's major holdings include NextEra Energy, Inc. (NEE) with a 13.53% weighting, Duke Energy Corporation (DUK), and Southern Company (SO) with 7% and 6.49% weightings, respectively.
NEE has gained 7.2% over the past year and 10.8% over the past month, while DUK’s shares have surged 5.6% over the past year and 3.7% over the past months. SO has gained 16.1% over the past year and 13.9% over the past nine months.
POWR Ratings Reflect Solid Outlook
IDU's overall A rating equates to Strong Buy in our proprietary POWR Ratings system. The POWR ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight different categories. IDU has an A grade for Trade and Peer and a B for Buy & Hold. Of the 13 ETFs in the A-rated Utility ETFs group, IDU is ranked #2.
Bottom Line
IDU’s shares have surged 2.8% over the past month. Since the utility sector is defensive, we think it could be wise to invest in IDU amid the current market and economic uncertainties.
How Does iShares U.S. Utilities ETF (IDU) Stack Up Against its Peers?
While IDU has an overall A rating, one might want to consider its industry peers SPDR Select Sector Fund - Utilities (XLU) which has an overall A (Strong Buy) rating, and Vanguard Utilities ETF (VPU), and Fidelity MSCI Utilities Index ETF (FUTY) which have an overall B (Buy) rating.
IDU shares were trading at $84.81 per share on Thursday afternoon, down $0.19 (-0.22%). Year-to-date, IDU has declined -3.10%, versus a -19.94% rise in the benchmark S&P 500 index during the same period.
About the Author: Spandan Khandelwal
Spandan's is a financial journalist and investment analyst focused on the stock market. With her ability to interpret financial data, she aims to help investors evaluate the fundamentals of a company before investing.
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