ETF of the week: Utilities play a role in the emergence of the IA

The utilities sector comprises companies that provide basic public services such as energy and sewage. They are generally characterized by low growth and stable margins. On the face of it, therefore, these companies would appear to be of little interest to an investor looking for long-term quality. But there's a catch. New technological advances and colossal computing power require a lot of energy. As a result, in recent weeks, these companies have rebounded strongly, as the chart below shows.

S&P500 Utilities has beaten the S&P500 in recent weeks (source: MarketScreener)

 

ETF selected: iShares S&P500 Utilities Sector UCITS ETF

What's in this ETF?

The ETF is invested in 30 companies. Most of these are electricity producers (67%), multi-service companies (27.4%), water companies (2.4%) and gas companies (1.8%).

The companies that make up the product are all American. They include giants Nextera Energy (13.9% of the total), Southern (8.1%), Duke Energy (7.7%), Constellation Energy (6%), American Electric Power (4.6%), Sempra (4.6%), Dominion Energy (4.3%), Exelon (3.8%), PG&E (3.7%) and Public Service Enterprise Group (3.5%). All in all, the top ten weightings account for 60% of the investment.

All assets are invested in the United States.

The ETF is directly replicated, which means that the securities are held directly, unlike synthetic replication, which involves holding a substitute basket. Total assets under management are not gigantic, but at $264 million, they are reassuring. Finally, fees are low, at 0.15%.

The ETF has only been in existence since 2018. Despite this, past performance has demonstrated the sector's resilience. Note that dividends are reinvested directly in the fund.

What are its benefits?

• Investors are taking a fresh look at utilities. Technological advances such as AI require a lot of energy.
• The ETF offers global exposure to US companies in the sector.
• Assets under management are reassuringly high, and management fees are low.

More negative points

• AI is still a young technology. It will undoubtedly take a few years before the demand for electricity directly linked to the technology is distinct. But as is often the case, investors are anticipating the future and positioning themselves on these companies in advance of future profits.

The ETF's identity card :

Assets under management (in $M): $263M

Number of positions: 30

ISIN code: IE00B4KBBD01

Ticker: IUUS

Fees: 0.15

You can find this ETF on MarketScreener.