In the days before deregulation of the utility industry, electric and gas stocks provided investors with a steady income stream that ranked low on investment stress. That all changed during the hotshot '90s, as many utility companies bought into businesses they knew little or nothing about, like telecommunications or home security. Now the tide has turned, and gas and electric companies are getting back to what they know best-power.
"Many [utilities] went into risky businesses and lost as their share values dropped," says Barry Abramson, co-portfolio manager of the Gabelli Utilities Fund (GABUX). "The management that survived learned their lessons, and now many are in better shape with a 'back to the basics' business strategy."
That stick-to-your-knitting attitude has worked for Abramson and his stock selections in the GABUX portfolio. Up nearly 24 percent year-to-date through November 28, the fund has about 70 stocks in its portfolio: 5 percent in telecom, 15 percent in gas utilities and 80 percent in electric utilities.
Abramson prefers regulated utility companies. He invests in all sizes of companies and seeks out those that may be ripe for a takeover. But don't expect this five-star Morningstar fund to be a razzle-dazzler. Basic utility companies aren't made that way. For conservative investors, this fund is worth a look.
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Dian Vujovich is an author, syndicated columnist and publisher of fund investing site www.fundfreebies.com.