The Utilities sector may not be one of the most fashionable or captivating sectors for investors, however, it is notoriously good at weathering the effects of financial crises. The sector was relatively unfazed when the dot com bubble burst in 2001-2002, and again stood resolute during the credit crisis of 2008-2009. Indeed, in the US, if you would have bought a Utilities Sector ETF tracker, you would have outperformed the S&P 500 over the past 20 years.
Despite the typical resilient nature of the Utilities sector, it has still been subject to the impacts of the pandemic. The International Energy Agency has released data, which shows that the slump in electricity demand hadn’t been seen at this rate since the Great Depression. Furthermore, for every month that the lockdown has persisted, a nation’s electricity usage has fallen by up to 20%.
Nevertheless, despite the historic falls in electricity usage and, to a lesser extent, water and gas consumption, the Utilities sector has still managed to outperform the broader sector benchmarks. Since the start of the year, the FTSE All Share has shed -20.46% of its value. The FTSE All Share Utilities sector benchmark has seen a lesser -13.33% fall over this same time period.
In this article, we will assess the varying impacts of the pandemic on the Utilities sector and take a closer look at how the industry groups within the sector have performed. The article will also highlight some valuation metrics of the industry groups and evaluate some of the top-ranking stocks in the sector to see how they have responded to the changing environment brought about by Covid-19.
Performance of the Industry Groups
The performance between the Electricity industry and Gas, Water & Multiutilities industry has been largely similar since the start of the year. The FTSE All Share Electricity industry benchmark has fared slightly worse, falling by -15.81%, as opposed to a -12.58% fall for the Gas, Water & Multiutilities FTSE All Share benchmark.
The Electricity industry has suffered more from the lower levels of industrial power demand. The global lockdowns really took their toll on the electricity consumption of the industrial manufacturing sector. Unfortunately, the increase in home consumption, boosted by work from home, has failed to make up for the lost…
