When is the best time to invest in electric utilities? Are they a good investment?

I'm considering buying stock in Xcel Energy, AEP, and some other utilties, but should I wait until fall when demand has decreased? Is it a good idea to invest in energy?

2 Answers

  • 1 decade ago
    Favorite Answer

    In general, utilities are defensive stocks. In other words, they tend to outperform the general stock market when the market falls. This is because people will always have a healthy demand for electricity, even during recessions.

    Timing a market fall is very difficult, and only a few select people have ever done so sucessfully (none of whom are on yahoo answers).

    Also, waiting until autumn solely because demand for elecricity will decrease is not very logical... many people know that utilities have very seasonal demand, so that is priced into these stocks for years and years to come.

    As for energy stocks in general, a big catalyst for the sector ouperformance has obviously been oil prices, which have been much less volatile in the past 6 months and don't appear to be retreating.

    Trying to call the future direction of any commodity is just asking for trouble, but maybe $100/barrel and $5/gal gas would finally get some people to wake up and start consuming less oil... but probably not.

    Source(s): My brain.
  • Anonymous
    1 decade ago

    The best way to invest in utilities is through UTF - monthly dividends, discount to NAV. Put it on DRIP and leave it alone - let the dividends and the market do the rest.

Still have questions? Get your answers by asking now.