Utilities funds have been traditionally viewed as defensive investments which protect investments during difficult market conditions. Since the demand for these services remains constant over market cycles, such funds are ideal for those seeking a steady flow of current income through consistent dividend yields. In recent years many funds in this category have increased their exposure to emerging markets and have added unregulated utilities companies in their portfolio. This has led to higher returns and an increase in volatility. However, investors who are relatively risk averse can continue to rely on these funds for regular dividends over time.
Below we will share with you the 5 top rated utilities funds. Each has earned a Zacks #1 Rank (Strong Buy) as we expect the fund to outperform its peers in the future. To view the Zacks Rank and past performance of all utilities funds, then click here.
Fidelity Select Utilities (FSUTX) invests the majority of its assets in utility companies or those deriving a large share of their revenues from operations in this sector. It is non-diversified and may purchase foreign securities. It may also invest a large share of its assets in a single issuer. It is a no-load fund.
The fund returned 10.37% in 2009 and has a five year annualized return of 3.81%.
Gabelli Utilities AAA (GABUX) seeks both income and capital growth by investing at least 80% of its assets in utility companies. It focuses on firms providing electricity, gas and water services or equipment for these industries. It also invests in telecom and looks to gain from regulation and consolidation in the utilities sector. This utilities fund returned 14.96% over the last one year period.
Mario J. Gabelli is the fund manager and has managed this utilities fund since 1999.
Aim Utilities (FSTUX) invests a large share of its assets in stocks of companies in the utilities sector or related industries. Firms engaged in the production and distribution of gas and electricity as well as those providing telecom services constitute its major investments. Up to 25% of the fund’s assets may be used to purchase foreign securities. The fund has a five year annualized return of 5.22% This utilities fund has a minimum initial investment of $1,000 and an expense ratio of 1.51% compared to a category average of 1.40%.
Vanguard Utilities Index Admiral Shares (VUIAX) seeks to track the performance of the MSCI U.S. Investable Market Utilities Index. This index consists of companies in the utilities sector regardless of their market capitalization. This utilities fund returned 7.27% over the last one year period.
The fund manager is Donald M. Butler and he has managed this utilities fund since 2004.
Franklin Utilities A (FKUTX) seeks capital appreciation and current income. It concentrates the majority of its investments in public utilities. More than 25% of its assets are invested in companies that provide electricity, gas, water and communication services. The fund returned 9.71% in 2009 and has a ten year annualized return of 7.65%. As of December 2009, this utilities fund held 53 issues, with 4.41% of its total assets invested in Sempra Energy.
To view the Zacks Rank and past performance of all utilities funds, then click here.
About Zacks Mutual Fund Rank
By applying the Zacks Rank to mutual funds, investors can find funds that not only outpaced the market in the past but are also expected to outperform going forward. Learn more about the Zacks Mutual Fund Rank at http://www.zacks.com/funds/mutualfund/
