(Kitco News) - Utility stocks have emerged as one of the standout performers in 2024, driven by the twin factors of declining energy costs and easing interest rates. Over the past year, natural gas prices have fallen by approximately 20%, while coal prices have also dropped significantly, leading to lower electricity generation costs for utility companies. Additionally, the Federal Reserve’s recent rate cut has made dividend-paying stocks more appealing, and utilities have capitalized on this trend. As a result, the sector has seen a remarkable return of roughly 30% year-to-date, positioning itself as a stable haven for investors amid ongoing market volatility.
Ed Butowsky, founder of Chapwood Investments, provided his perspective on the strength of the utility sector in a recent interview with Jeremy Szafron, Anchor at Kitco News.
“Last time we spoke, I highlighted utilities, and they've since surged about 30%,” Butowsky said, attributing this performance to falling interest rates and cost reductions. “Stocks tend to move six to nine months ahead of earnings and economic data, and the perception of dropping rates gave the sector a real boost.”
Butowsky believes there’s still potential for more gains. “I think we're going to get another rate cut in utilities, and there's a hidden benefit here—generation costs have dropped significantly, adding to margins,” he said.
Butowsky also identified several specific utility companies that have benefited from these dynamics. Southern Company, Entergy, and Con Edison have performed particularly well, with year-to-date returns of approximately 28%, 32%, and 29%, respectively.
Butowsky noted that these companies are likely to see even more upside. “These are all regulated utility companies, and they have reached their target prices,” he explained. “But I believe those target prices are going to be adjusted upward, and we’re likely to see another 15% gain in utilities for the remainder of the year.”
With these stocks benefiting from both lower operational costs and favorable market conditions, Butowsky emphasized that the utility sector still has room to grow.
For a more in-depth exploration of Ed Butowsky’s investment insights, watch the full interview on Kitco News. To get the full details on his predictions and strategies for navigating the final months of 2024, be sure to check out the embedded video above.