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Recession-Buster Stock: Utilities SPDR (XLU:AMEX)

Posted August 6, 2008

"Even though the economy is slowing, we still need electricity. In fact, we need more than ever. That’s why so many power companies are expanding their services at a record pace and the federal government is allowing one Alaskan company to effectively take a weed-eater to nearly 60 miles of highly protected national park land." — Andrew Snyder

by Andrew Snyder

Baltimore and Ketchikan, Alaska — (TFN):  If there’s anything I like more than getting eyeball-deep in financial news and research, it’s spending time outdoors. A good trip into the wilderness or onto the water is always a perfect recipe for revitalizing my soul.

With the markets dashing up and down and getting nowhere but sideways, last week was a great time to grab my camping gear and spend a few days in the woods with my new wife. We flew into a small U.S. Forest Service cabin in the heart of the Tongass National Forest. According to the log book, we were the first visitors in nearly two months.

As we unloaded our gear from the DeHavilland Beaver, the half-ton pickup of the skies, we heard the telltale thumping of a helicopter overhead. 

“What is a helicopter doing way out here,” I said. After all, we were nearly 50 miles from the nearest road.

“Must be out for a sightseeing tour,” my wife replied.

After twenty minutes and five more helicopters passed through, some carrying huge pieces of equipment beneath them, we realized our cabin was smack dab in the middle of one of southeast Alaska’s most adventurous construction projects. The choppers were flying non-stop throughout the day as they hurried to install a 57-mile powerline between two hydroelectric plants before state funding ran out. 

The nearly $100 million-project has been in progress since 2001, but was halted for a few years after funds fell short. Now, with a new governor in power, dollars are flowing once again and trees are being cut and lines are being installed at a record pace.

Connecting the dots

This aggressive project is a good example of powerline infrastructure improvements that are taking place across the country. As the nation’s electricity demands grow, so does the need for more transmission lines. And so does your profit opportunity!

The increased demand is great news for investors in a bearish market. Utilities have traditionally been a fallback investment when the markets turn south. Now that the industry is nearly deregulated and demand is soaring, the situation is better than ever for smart investors.

***Oil prices are breaking record highs. So why is this Federal Reserve Chairman betting $509,000 of his own money on falling prices? Find out where the smart money is moving right now! ***

Even though the economy is slowing, we still need electricity. In fact, we need more than ever. That’s why so many power companies are expanding their services at a record pace and the federal government is allowing one Alaskan company to effectively take a weedeater to nearly 60 miles of highly protected national park land.

Investors weary of a falling equities market should pay attention. Right now, utilities are more than a safety play. They offer great appreciation potential, plus most firms pay a decent, inflation-beating dividend. 

Go for the gold

In a market that changes direction faster than an Olympic swimmer, it can be dangerous to pick just one utility company to sock your money into. That is why I continue to recommend the Utilities Select Sector SPDR (XLU:AMEX). It’s an ETF that tracks all of the nation major utilities, many of which are doing extremely well thanks to huge energy demands.

But the ETF is more than just a short-term speculative play. All of this infrastructure spending is going to pay off big time in the next two, five, and even ten years. While the rest of the equities market is nauseously bouncing around as it tries to get back on its feet, the utility industry will continue to expand and put profits in your pocket.

Nearly every day, somebody asks my opinion on where to invest their money. I’m starting to sound like a broken record, but it’s hard not to recommend a utility-based ETF. 

As long as the nation is addicted to energy, this sector will make investors the kind of money worth bragging about. Remember, long-term steady growth investments are often the key to huge asset appreciation. 

No matter what the economy is doing, what the Fed is planning, or what investment bank the government is bailing out now, electric bills will be the first check Americans write every month. Invest in the Utilities Select Sector SPDR and a portion of those checks will end up in your bank account. 

I may have been on a camping trip in the middle of the wilderness, but it was impossible not to see the money-making opportunities that were buzzing overhead. This is a fantastic time for the nation’s energy industry. Take advantage of it. 

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Posted by Andrew Snyder · Filed Under Oil and Energy 

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