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The Importance Of Aqua America’s Q2 2015 Earnings

Diluted income from continuing operations per share increases to $0.32. Quarterly cash dividend increases 7.9 percent to $0.178. The ongoing trend of strategic acquisitions is gaining steam and alters the future prospects for Aqua America. Aqua America (NYSE: WTR ), the second-biggest publicly traded U.S. water utility, reported earnings that reinforced its position as an excellent defensive play, a stock that can consistently deliver price gains even during periods of market duress. Aqua reported income from continuing operations of $57.4 million, which represents a notable annual increase of 4.7 percent. Earnings per share rose to $0.32 for the quarter, compared to $0.31 for the same quarter in 2014. As a result of robust customer growth, revenues increased to $205.8 million, rising 5.4 percent compared to the second quarter of last year. On a year to date basis, Aqua America achieved a 9 percent increase in income. During the same period, Aqua completed eight acquisitions, expanding its customer base by almost 8,700 connections. It aims to close at least 15 acquisitions by the end of the year, which is expected to result in an annual customer growth of 1.5 to 2 percent. This is the reflection of its successful strategy to focus on building value by fully optimizing its rapidly increasing asset portfolio while boosting acquisitions and controlling expenses. (click to enlarge) The long standing tradition of substantial dividend increases was reaffirmed . In fact, Aqua has paid a consecutive quarterly dividend for 70 years and the latest quarterly cash dividend of $0.178 per share, 7.9 percent higher compared to the previous quarter, represented the company’s 25th dividend increase in 24 years. It’s clearly impressive that the dividend has been increasing at an annual growth rate of 7.6 percent, which speaks to the company’s financial strength and unfailing commitment to increase shareholder value. In the first half of 2015, Aqua invested $150.1 million in infrastructure enhancements. More importantly, the company’s capital investment plan includes the increase of such investments to $325 million by the end of the year and more than $1 billion over the next three years. This demonstrates the management’s ambition and resolve to move forward aggressively despite the overhanging market turbulence. (click to enlarge) The cornerstone of Aqua America’s success has been its sophisticated expansionary approach aimed at constantly seeking acquisition opportunities that strategically expand its network of municipal and privately owned systems. The success of this approach is highlighted by the resilience shown during the recent vertiginous market swings and the subsequent outperformance of most major indexes. Aqua America has consistently maintained an edge over its main competitors in most crucial areas, and this trend remains intact. Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More…) I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. Share this article with a colleague

How To Avoid The Worst Sector Mutual Funds: Q3’15

Summary The large number of mutual funds has little to do with serving your best interests. Below are three red flags you can use to avoid the worst mutual funds. The following presents the least and most expensive sector mutual funds as well as the worst overall sector mutual funds per our Q3’15 sector ratings. Question: Why are there so many mutual funds? Answer: mutual fund providers tend to make lots of money on each fund so they create more products to sell. The large number of mutual funds has little to do with serving your best interests. Below are three red flags you can use to avoid the worst mutual funds: Inadequate Liquidity This issue is the easiest to avoid, and our advice is simple. Avoid all mutual funds with less than $100 million in assets. Low levels of liquidity can lead to a discrepancy between the price of the mutual fund and the underlying value of the securities it holds. Plus, low asset levels tend to mean lower volume in the mutual fund and larger bid-ask spreads. High Fees Mutual funds should be cheap, but not all of them are. The first step here is to know what is cheap and expensive. To ensure you are paying at or below average fees, invest only in mutual funds with total annual costs below 2.37%, which is the average total annual cost of the 632 U.S. equity sector mutual funds we cover. Figure 1 shows the most and least expensive sector mutual funds. Rydex provides three of the most expensive mutual funds while Vanguard mutual funds are among the cheapest. Figure 1: 5 Least and Most Expensive Sector Mutual Funds (click to enlarge) Sources: New Constructs, LLC and company filings Investors need not pay high fees for quality holdings. The Fidelity Select Consumer Staples Portfolio (MUTF: FDFAX ) earns our Very Attractive rating and has low total annual costs of only 0.94%. On the other hand, the Vanguard Specialized Funds REIT Index (MUTF: VGSNX ) holds poor stocks. No matter how cheap a mutual fund, if it holds bad stocks, its performance will be bad. The quality of a mutual fund’s holdings matters more than its price. Poor Holdings Avoiding poor holdings is by far the hardest part of avoiding bad mutual funds, but it is also the most important because a mutual fund’s performance is determined more by its holdings than its costs. Figure 2 shows the mutual funds within each sector with the worst holdings or portfolio management ratings . Figure 2: Sector Mutual Funds with the Worst Holdings (click to enlarge) Sources: New Constructs, LLC and company filings Fidelity appears more often than any other providers in Figure 2, which means that they offer the most mutual funds with the worst holdings. Our overall ratings on mutual funds are based primarily on our stock ratings of their holdings. The Danger Within Buying a mutual fund without analyzing its holdings is like buying a stock without analyzing its business and finances. Put another way, research on mutual fund holdings is necessary due diligence because a mutual fund’s performance is only as good as its holdings’ performance. PERFORMANCE OF MUTUAL FUND’S HOLDINGS = PERFORMANCE OF MUTUAL FUND Disclosure: David Trainer and Max Lee receive no compensation to write about any specific stock, sector, or theme. Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More…) I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Utilities Are Not The Safe Haven You Think They Are

On a peak to trough basis, utilities have underperformed the S&P 500 and Dow Jones Industrial Average in 2015. XLU fell 56.87% and 49.66% during each of the last two bear markets. It’s not worth the extra yield to buy something with as much risk to principal as utilities stocks. In my recent article, ” The Fed Might Do Something It Hasn’t Done In 28 Years ,” I dispelled a myth concerning the labor force participation rate that’s been floating around the financial world. Today, I turn my attention to dispelling another myth: that utilities stocks are a safe-haven investment. For some strange reason, utilities have gained a reputation for being a safe-haven during turbulent times. Perhaps that was true in the distant past. But in today’s world, it couldn’t be further from the truth. As volatility picked up in recent weeks, it wouldn’t surprise me if many investors in the Seeking Alpha community dumped some money in utilities, under the assumption that a nearly 4% yield and reliable cash flows will protect you from a potential bear market. For those investors and anyone else considering parking money in Wall Street’s notorious safe haven, the chart below might make you cringe. (click to enlarge) As you can see on the monthly chart, during each of the past two bear markets, the Utilities Select Sector SPDR Fund (NYSEARCA: XLU ), an ETF that serves as a proxy for the utilities sector, was absolutely destroyed. During the 2000 to 2002 bear market, XLU declined 56.87%. That decline was worse than the S&P 500’s (NYSEARCA: SPY ) 50.51% drop and worse than the Dow Jones Industrial Average’s (NYSEARCA: DIA ) 38.75% fall. Although XLU managed to outperform the S&P 500 and the Dow during the 2007 to 2009 bear market, it still fell 49.66% peak to trough. I can’t imagine any investor thinking a 50% drop would qualify something as a safe haven, even if that security pays a couple of percentage points more in dividends than do funds tracking the major market averages. What’s happened so far in 2015? Once again, XLU is underperforming the Dow and the S&P 500. The peak to trough declines for XLU are 17.66%, while the Dow pulled back 16.24% and the S&P 500 fell 12.54%. Unlike a bond, which matures at par, there is no contractual obligation ensuring XLU will ever return to the level at which you bought it. I realize that in today’s low interest rate environment, investors who are desperate for income may be tempted to buy utilities for the 3.79% SEC yield XLU currently sports. I’d rather make 0% in a deposit account or 3%+ in any number of individual corporate bonds, than assume the substantial risk to principal that utilities have shown in recent bear markets. Yes, I realize that during smaller bull market corrections, utilities have shown themselves to be outperformers. But who needs “safe havens” in bull markets? It’s the bear market safe havens that are valuable. And utilities, in this millennium, have been anything but a bear market safe haven. Just because everyone repeats something over and over, doesn’t mean that thing is necessarily true. An investment with substantial risk to your principal is not a safe haven, no matter how many pundits claim it is. Disclosure: I am/we are long SPY. (More…) I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.