Stability utility stocks gain new interest after a shaky period
Unless you go for white-knuckle amusement park rides, the Dow Jones industrial sector has probably not been your investment vehicle lately. Last week, health-care stocks, an institutional darling, were the latest group sent for a loop. After 17 years of gains, Hospital Corporation of America reported it would have flat earnings in 1985 and again in '86.
With that, the entire industry fell from grace. Many analysts had been recommending these stocks, expecting 15 percent earnings growth for years to come. HCA's announcement shattered their faith.
Meanwhile, takeovers -- real and imagined -- continue to buoy the Dow. With Procter & Gamble buying Richardson-Vicks and Philip Morris swallowing General Foods, takeover speculation is spreading.
It ran the gamut from Beatrice to Texas Oil & Gas to CBS last week. This frenzy contributed to the heavy trading volume on the Dow Jones industrial average, which finished the week up 7.95 points, at 1,328.74.
Which brings us to electric utilities.
These issues are known as ``widow and orphan'' stocks, because of their relative stability.
They are not without risk, however.
After a long run-up over the past year or so, utilities fell from favor in late July.
As it became apparent that the economy would rebound and interest rates firmed up (a negative for utilities), a selling spree hit. On July 23, the Dow utility index had its biggest loss in more than two decades.
The correction had been predicted, but its swiftness was unexpected. Since their highs in early July, utility stocks have generally slid by about 10 percent.
Lately, however, utilities been showing some strength again.
It's a flight to safety, reflecting concern about the market in general, figures Steven Ballentine, manager of Prudential-Bache Utility Fund. Despite the July drop-off, his fund has shown a 12.5 percent gain on the year.