Should you own Utility stocks going forward? Jefferies weighs in
Investing.com -- In a note to clients Tuesday, Jefferies analysts presented a mixed view on Utility stocks, maintaining an Overweight rating in large-cap Utilities but an Underweight rating in small-cap Utilities.
While sentiment toward the sector remains strong, with inflows into ETFs, Jefferies' strategy team holds diverging opinions based on market capitalization.
Sentiment for Utilities has been "very strong and provides a nice tailwind for the group," partly because "many of the stocks will help with the AI build out."
Despite the sector's lower liquidity, Jefferies notes that "flows are currently in the sweet spot, not too hot and not too cold."
Addressing the "higher for longer" interest rate environment, Jefferies believes it's "not really" a "death knell for this sector."
The firm's forecast suggests rates will hover close to current levels, with three Fed Funds cuts expected in 2025 starting in September.
While Utilities in small caps are more tied to rates, Jefferies notes that the correlation is weak in large caps.
Interestingly, when the Fed funds rate falls, Utilities typically lag, which "has not been the case in this rate reduction environment."
However, Jefferies points out that if investors are seeking yield, "the dividend yield is below both the 10-year and the 2-year," suggesting "one can find cheaper dividend-paying stocks elsewhere."
Valuations are also said to be a concern, with Utilities viewed as "expensive in both size segments."
Jefferies' overall view leans towards Overweight large-cap utilities due to attractive valuations and strong earnings visibility, while being Underweight in small caps where Utilities are among the "most-expensive groups and does not provide enough economic torque."
Related articles
Should you own Utility stocks going forward? Jefferies weighs in
Snap to launch consumer smart glasses in 2025, rivaling Meta
BlackRock portfolio managers 'laser focused' on capturing market opportunities
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Business Upturn
3 hours ago
- Business Upturn
Jefferies bullish on real estate pre-sales; sees rate cuts boosting mid-income housing
By Markets Desk Published on June 12, 2025, 07:49 IST Jefferies has turned increasingly constructive on the Indian real estate sector, expecting pre-sales growth for listed developers to rise over 20% in FY26, up from 15% in FY25. The brokerage cited strong project launch activity in Q1FY26, which lends credibility to developer guidance, contrasting the patchy execution seen last year. It further noted that the recent rate cuts by the RBI are a relief for the mid-income and affordable housing segments, improving affordability and mortgage flow. Despite the sharp rally in property stocks over the past year, Jefferies pointed out that most names continue to trade in line with their 5-year NAV premiums, leaving room for re-rating if visible sales growth persists. Top picks include DLF, Godrej Properties (GPL), and Lodha (Macrotech Developers). Disclaimer: The views and target prices mentioned are as stated by Jefferies and do not represent the opinions or recommendations of this publication. Investors are advised to consult their financial advisors before making any investment decisions. Markets Desk at
Yahoo
5 hours ago
- Yahoo
Analyst Kelly Shi from Jefferies Maintained a Buy Rating on Insmed Incorporated (INSM)
Insmed Incorporated (NASDAQ:INSM) is among the 13 Biotech Stocks with Huge Upside Potential. Kelly Shi of Jefferies has given Insmed Incorporated (NASDAQ:INSM) a buy recommendation, stating that she is confident in the TPIP treatment's impending Phase 2 data for pulmonary arterial hypertension. A biopharmaceutical research team taking notes in front of a laboratory's microscope. Shi anticipates a substantial decrease in pulmonary vascular resistance, the main outcome of the trial, of 20%, which is regarded as a definite success. If the results are encouraging, TPIP may replace Tyvaso, the current standard treatment. On June 4, Wells Fargo reaffirmed its Buy recommendation, with a price objective of $107. Shi points out that TPIP's once-daily dosage is a significant benefit over Tyvaso's four-times-daily schedule, which could increase adherence and make it more appealing to patients as well as physicians. The efficacy potential of TPIP is supported by interim study results that show additional advantages in six-minute walk distance (6MWD). Shi expects significant market penetration in light of these considerations, which could lead to an increase in Insmed Incorporated (NASDAQ:INSM)'s valuation. Both analysts highlight that if future trial results live up to predictions, TPIP has the potential to completely change the way that PAHs are treated. Insmed Incorporated (NASDAQ:INSM) is a biopharmaceutical firm that improves the lives of individuals suffering from serious and rare diseases. While we acknowledge the potential of INSM as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock. READ NEXT: 10 High-Growth EV Stocks to Invest In and 13 Best Car Stocks to Buy in 2025. Disclosure. None. Sign in to access your portfolio
Yahoo
6 hours ago
- Yahoo
Analyst Kelly Shi from Jefferies Maintained a Buy Rating on Insmed Incorporated (INSM)
Insmed Incorporated (NASDAQ:INSM) is among the 13 Biotech Stocks with Huge Upside Potential. Kelly Shi of Jefferies has given Insmed Incorporated (NASDAQ:INSM) a buy recommendation, stating that she is confident in the TPIP treatment's impending Phase 2 data for pulmonary arterial hypertension. A biopharmaceutical research team taking notes in front of a laboratory's microscope. Shi anticipates a substantial decrease in pulmonary vascular resistance, the main outcome of the trial, of 20%, which is regarded as a definite success. If the results are encouraging, TPIP may replace Tyvaso, the current standard treatment. On June 4, Wells Fargo reaffirmed its Buy recommendation, with a price objective of $107. Shi points out that TPIP's once-daily dosage is a significant benefit over Tyvaso's four-times-daily schedule, which could increase adherence and make it more appealing to patients as well as physicians. The efficacy potential of TPIP is supported by interim study results that show additional advantages in six-minute walk distance (6MWD). Shi expects significant market penetration in light of these considerations, which could lead to an increase in Insmed Incorporated (NASDAQ:INSM)'s valuation. Both analysts highlight that if future trial results live up to predictions, TPIP has the potential to completely change the way that PAHs are treated. Insmed Incorporated (NASDAQ:INSM) is a biopharmaceutical firm that improves the lives of individuals suffering from serious and rare diseases. While we acknowledge the potential of INSM as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock. READ NEXT: 10 High-Growth EV Stocks to Invest In and 13 Best Car Stocks to Buy in 2025. Disclosure. None. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
