Russell 1000 Sector Attributes — Utilities Are Unattractive

The yield on utilities is at the 20-year average, while the other sectors are at yields higher than the 20-year average.  When current yields are higher than average yields, one prospect is for prices to rise to “normalize” the yield.  Utilities have no indicated price appreciation potential by that logic.

The telecommunications and utilities sectors each have trailing P/E ratios higher than their 20-year average.  The other sectors have lower P/E ratios than their average.  Lower P/E ratios suggest the possibility of a price multiple expansion for a price rise.  Telecomm and utilities do not provide good prospects on that dimension

On a forward P/E basis versus the 15-year average of forward estimates, all sectors other than utilities suggest the possibility of multiple expansion to historic average levels.

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This data is from JP Morgan Asset Management.

Healthcare, consumer staples, telecomm and utilities have the lowest Beta to the S&P 500.

Relative to the S&P 500 (proxy SPY), the Russell 1000 Growth (proxy IWF) has a lower exposure to utilities, telecomm, energy and financials, and a much higher exposure to technology.  The Russell 1000 Value (proxy IWD) has a higher exposure to financials, energy and utilities; and a lower exposure to technology, industrials, consumer discretionary, and consumer staples.

The top 10 holdings of Russell Growth are:

The top 10 holdings of Russell Value are:

 

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