Russ Koesterich from BlackRock Inc. highlights worries about the valuation of utility stocks due to increased investor interest in ‘safe haven’ assets amidst market uncertainties in 2013.
Utilities Sector Valuation Concerns Highlighted by BlackRock Strategist
On May 15, 2013, Russ Koesterich, the global chief investment strategist at BlackRock Inc. (NYSE: BLK), raised concerns regarding the valuation of utility stocks in his latest commentary. Noting the robust performance of the stock markets in 2013, with the S&P 500 and Dow Jones Industrial Average both up 16%, Koesterich pointed out that investors have flocked to “safe haven” assets, including utility stocks, due to risk aversion.
The Dow Jones U.S. Utilities Index has seen a significant rise of 14.4%, and individual companies like Ameren Corp (NYSE: AEE) and Exelon Corporation (NYSE: EXC) have outperformed the industry average. Despite offering stability and dividends, the valuation of these stocks has surged. Ameren Corp’s price to tangible book value has increased by 20.5% to 1.47, while Exelon Corp’s value has risen by 22.3% to 1.63.
Koesterich’s analysis suggests that although these utility stocks offer consistent revenue, their current valuations may be overinflated, a situation that could persist for some time.
