Moreover, because the utility holding companies were highly leveraged and because there was uncertainty over their break-up procedures, they were subject to wider price fluctuations than operating companies. There are plenty of reasons the index is up right now, besides the obvious needs of investors for shelter in this irrational stock market. In general, utilities were oversold, despite the lack of any real negative news, and are just now bouncing back from depressed levels in active trading. How oversold was demonstrated by the Philadelphia Utility Index, which dipped as low as 239.10 mid March, its lowest level since March 1998. Utilities are also taking advantage of the newly available technologies, and are lately being recognized for it by Wall Street.
Utilities are very different from other equity issues.
Besides the fact that they are counter-cyclical, meaning that these companies tend to turn down as the economy heats up and rise when the economy slows down, they tend to be interest rate as well as inflation resistant. In the jittery inflation environment of late, these stocks are considered safe havens. Additionally, we have seen a strong recent drift towards bonds for security reasons, and utilities have always behaved more like bonds than equities in that they pay high dividends. The industry has also faced a lot of changes, and the bottom line is that utility companies have gotten stronger as they have been forced to change to remain competitive. One major development is that energy distribution and generation have separated in the last couple of years, making companies more specialized and cost efficient.