BMO Equal Weight Utilities Index ETF (ZUT.TO)

AI is increasingly becoming a power story. AI = electricity demand. Defensive way to get some AI exposure. Diversified across Canadian utility companies. Next phase of AI will reward companies powering the infrastructure. Corrections here will probably be milder than in the general market.

Utilities are actually becoming growth stocks, not the stodgy old defensive stocks they used to be. MER is 0.61%.

 Equal-weight vs. market-cap weight, that's the difference. Both are defensive, pay good dividends and have had good runs. He would trim utilities and get more into software tech. He wouldn't enter this now. Doesn't see another run ahead. 

ZWU holds Canadian utilities, writes covered calls on ~50% of the portfolio. Use it if you have a neutral or range-bound view of the Canadian utilities market. If you buy near market bottom, won't participate as much in the snap-back.

If you see growth and capital appreciation on the horizon, use ZUT -- almost the same basket, but with no covered call overlay. Lower yield. Money works for you over the long haul.

You need to anticipate which direction yields will move, because the market has already priced in interest rate cuts. If rates don't fall, an interest-rates sensitive like ZWU will perform at or underperform your expectations; this has already rallied 10% in the past month. ZWU pays you more income given its covered call overlay vs. ZUT which doesn't give you extra income.

You need to anticipate which direction yields will move, because the market has already priced in interest rate cuts. If rates don't fall, an interest-rates sensitive like ZWU will perform at or underperform your expectations; this has already rallied 10% in the past month. ZWU pays you more income given its covered call overlay vs. ZUT which doesn't give you extra income.

A non-covered call alternative to ZWT. Over the long term, outperforms the covered call on a total return basis. The better growth alternative.

For covered call strategies, always consider the yield and the source of that yield. With ZWT, you'll forego some upside if utilities markets are strong, but you get more yield on an ongoing basis. Best for ongoing yield to pay your bills.

Given the kind of market we're heading into, some strategists feel pretty good about utilities. Utilities are considered defensive, as people need to pay them whether the economy is good or bad; tend to have stable dividends.

If you're interested in the utilities sector, this is a good one to look at. All utilities had a big selloff when rates were rising in 2022 and 2023. Then, as interest rates went nowhere, so did the stocks, just collecting the dividend. BOC has cut twice, Fed is probably going to start. Utilities have come up off lows, but haven't started to move up yet.

There's certainly that potential there for more demand for power generation as we get into AI. It's steady growth, but a mature sector. Catalysts could be AI or EVs really taking off. Influenced quite a bit by swings in interest rates.

Return of 38% over 5 years, whereas ZWU has a total return of only 13%. With covered calls like ZWU, you miss out on upside over time. The underlying securities of a covered call strategy often perform a bit better. So if you don't need the income, start looking at the underlying securities.

Interest rate sensitive product that can be volatile. If interest rates fall, this product will perform well. Would not recommend as a bond substitute. Next few months are a good time to add to this position. If/when interest rates fall (economic hard landing) stock will do very well. 

Utility volatility impacting share price with rising interest rates.
Trying to be conservative, but will hold shares.
Duration negatively impacting duration of cash flows.

XUT is market cap, ZUT is equal weighted. ZUT gives you more exposure to smaller players. HOG gives you more pipeline and energy services business, which acts similarly to utilities. It also hedges you on the downside. Could be a compliment to the other utility ETFs.

Utilities are good for yield seekers. Could look at ZWU with broader based with utilities + other dividend players as well as some US exposure. Overall, good for income.