Judith Saryan, whose Eaton Vance Utilities Fund was the third-best performer in its class in the past 12 months, expects her holdings in...
Judith Saryan, whose Eaton Vance Utilities Fund was the third-best performer in its class in the past 12 months, expects her holdings in TXU, Edison International and Exelon to gain from high energy prices.
About 10 percent of the $911 million mutual fund is in TXU, Texas’ largest power producer; Edison International, the owner of California’s No. 2 utility; and Exelon, the largest U.S. utility owner.
The stocks jumped as much as 60 percent this year because the companies set prices based on oil and gas, and produce power at a lower cost using coal and nuclear facilities, Saryan said.
“You’re seeing their margins expand tremendously because power prices are going up and the cost of generation is, in effect, not going anywhere,” Saryan, 51, said in an interview at Eaton Vance’s offices in Boston.
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The Eaton Vance fund rose 32 percent in the past 12 months, as of Oct. 11, data compiled by Bloomberg show. Utilities are the biggest gainers after natural-resources funds among those that concentrate assets in a specific industry.
The Jennison Utility Fund, up 41 percent, and the ProFunds Utilities UltraSector Fund, up 36 percent during that same period, were the category’s top performers.
Saryan’s fund invests in electric, gas, water and telecommunications stocks. About 56 percent of the fund is in electric utilities and 25 percent is in telecom companies such as BCE, Canada’s biggest telephone carrier. Thirty-six percent of the assets are invested outside the U.S., which is a larger proportion than most utilities funds.
Rising oil and natural-gas prices helped the fund, Saryan said. Dallas-based TXU was allowed in September to raise customers’ rates after natural-gas prices gained because of hurricanes Katrina and Rita. Both storms damaged oil-production platforms and rigs as they moved through the Gulf of Mexico region.
TXU shares almost tripled in 2004 and climbed an additional 60 percent this year. Edison International’s stock rose 59 percent in the past 12 months and Exelon gained 28 percent.
The Eaton Vance fund rose at an average annual rate of 6.2 percent in the past five years, compared with the average decline of 4.5 percent for competing utilities funds.
Investors typically buy utilities stocks for their dividend yields. The 15 companies in the Dow Jones Utilities Average have an average yield of 3.2 percent, compared with the 2.1 percent of the benchmark Standard & Poor’s 500 Index and the 10-year Treasury note’s 4.4 percent.
Utilities’ dividends may lose their appeal should interest rates continue to rise, Saryan said.