Chapter 1
UTILITIES BASICS
It’s 7:30 a.m., and if your alarm clock was working, it would have woken you for work an hour ago. The cold wakes you instead—it’s only 40 degrees in your bedroom. Near hypothermic, you flip the light switch—nothing. Grumbling and very late, you blindly stumble out of bed, stubbing your toe. You painfully hobble toward the kitchen for a redeeming hot cup of coffee. Sadly, there’s no water coming out of your faucet. Cold, caffeine-less, and cantankerous, you leave for work hoping your job is still waiting for you.
Utilities may not have sexy brand names or occupy skyscrapers on Wall Street, but the sector will get your attention if your electricity, gas, and water are turned off at six in the morning. The Utilities sector plays a critical role in both our personal lives and the global economy, and can serve an equally important purpose in an investor’s portfolio.
It’s likely most people don’t worry about understanding how the Utilities sector operates. But for investors, understanding key aspects of the sector—the tremendous amount of investment required to build utilities infrastructure and the complex regulations involved in pricing the services, for example—is critical in determining how Utilities stocks behave, when to overweight or underweight Utilities, and what types of Utilities stocks are likely best for the prevailing economic conditions, political environment, and market sentiment.
This book’s aim is to help you become a better investor in ...
