The Utilities sector ranks ninth out of the ten sectors as detailed in my Sector Rankings for ETFs and Mutual Funds report. It gets my Dangerous rating, which is based on aggregation of ratings of eight ETFs and 28 mutual funds in the Utilities sector as of April 23, 2013. Prior reports on the best & worst ETFs and mutual funds in every sector and style are here.

Figure 1 shows the best two and five worst ETFs in the Utilities sector, and Figure 2 shows the five best and worst Utilities mutual funds. Not all Utilities sector ETFs and mutual funds are created the same. The number of holdings varies widely (from 21 to 78), which creates drastically different investment implications and ratings. The best ETFs and mutual funds allocate more value to Attractive-or-better-rated stocks than the worst ETFs and mutual funds, which allocate too much value

A Simple Market Cap Based Strategy For Generating Alpha

This is part 2 of a 5 part series of articles on using characteristics of stocks to generate alpha. The previous article may be found here.

Please note: Throughout this article when I am talking about small stocks, I am NOT talking about penny stocks or firms traded on the OTCBB or Pink Sheets. All of those stocks are extremely risky, and there has been extensive academic research showing that they have negative returns on average. That is, almost everyone loses money investing in penny stocks. In this article I am discussing small-cap stocks that trade on the NYSE, Nasdaq and former Amex.

As I discussed in my last article on the four factor model, there are four major characteristics of individual equities that are associated with a stock's performance over time. Taken together, these 4 factors predict more than

Most investing articles focus on one or two specific stocks or offer a laundry list of potential research targets. Articles on Seeking Alpha concerning the utility sector are no different. However, it is important to dovetail specific utility selections into an overall sector approach and an overall portfolio strategy.

There are several distinct sub-sectors within the utility sector, each with potentially different investment characteristics. For instance, many investors buy utilities to add yield and income to their portfolio, but not all utilities offer the best yields. For example, water utilities historically offer about half the yield as regulated electric utilities. Gas distribution firms may also offer substantially lower yields than their regulated electric counterparts. The most widely viewed utility sub-sectors are:

• Regulated versus Non-regulated
• Regulated Electrical
• Non-regulated Merchant Electrical Power
• Regulated Natural Gas Distribution
• Regulated Electrical Transmission
• Regulated Water Distribution
• International

Within the utility sector, investors can also choose