Larry Berman CFA, CMT, CTABMO Equal Weight Utilities Index ETFZUT.TOBUYMar 25, 2013

Utility volatility impacting share price with rising interest rates.
Trying to be conservative, but will hold shares.
Duration negatively impacting duration of cash flows.

XUT is market cap, ZUT is equal weighted. ZUT gives you more exposure to smaller players. HOG gives you more pipeline and energy services business, which acts similarly to utilities. It also hedges you on the downside. Could be a compliment to the other utility ETFs.

Utilities are good for yield seekers. Could look at ZWU with broader based with utilities + other dividend players as well as some US exposure. Overall, good for income.

ZWU-T vs. ZUT-T. ZWU-T includes non-traditional utilities and is a much broader way to play it. The pure utilities asset class is one of the most expensive equities on the planet. He prefers the broader diversification and the covered call overlay. ZWU-T is his preference.

An ETF for utilities. A great defensive sector with amazing performance lately. XUT-T is good, but 60% is in the top 4 holdings (inculding Fortis and Algonquin); 4% yield and 55 basis point cost. ZUT-T is more diversified and equal-weight. ZWU is also equal weight but does covered calls to create extra income, which sells future income for gains today; yields 6%. Given the strong performance of utilities in the past year, covered calls have lagged.

Prefers the BMO Covered Call Utilities (ZWU-T), which has US utilities as well, giving better diversification. The problem with utilities is that they are very, very interest rate sensitive.

He likes the utility space, but about 2 months ago he reduced his exposure. Utilities are very good instruments for providing yield, and there is a strong demand. Some have had a real run, but he doesn’t believe this basket as a whole represents the growth opportunities that the multiple is trading at. He’d rather Buy individual stocks. His favourite is Emera (EMA-T).

If your view is that utilities is going to be a good place to be in Canada for the foreseeable future, and you want to diversify away from energy and financials, it is a good holding. Be aware that some yields may not be sustainable for the long-term. Dividend yield of 4.1%.

A few stocks are responsible for most of the movement in the valuation. This ETF offers diversification, unless you have some special talent for picking the best stocks of the sector. If you have only a few of the stocks, then you are more subject to volatility. This is an equal weighted ETF and he likes it for that reason.

Tracks the Canadian Utilities sub index. It is conservative and not as volatile as the rest of the market. Diversify the risk away from owning one utility.