Market Overview

ETFs For The Power Acquisition Binge

One analyst says the recent spate of acquisitions in the U.S. power sector is "just the tip of the iceberg." Bloomberg News reports that deals in the sector have jumped by more than 20-fold by value in the first eight months of the year.

Knowing that more deals like Blackstone's (NYSE: BX) $4.7 billion purchase of Dynegy (NYSE: DYN) could be on the way makes it an ideal time to take a look at power and utilities ETFs that hold companies that are both targets and buyers.

Pure-play utilities options: Utilities Select Sector SPDR (NYSE: XLU) and the Vanguard Utilities ETF (NYSE: VPU): Regulated utilities face little in the way of growth prospects and the recession has pressured their profit margins, so acquisitions are the best way for these companies to boost the bottom line.

Look for companies like Duke Energy (NYSE: DUK) and Exelon (NYSE: EXC), both of which can be found in both ETFs, to be on the prowl for acquisitions. If nothing else, you'll get decent yields with both ETFs.

A global option: SPDR FTSE/Macquarie Global Infrastructure 100 ETF (NYSE: GII): GII has a good mix of U.S.-based companies like Duke and Exelon as well as European and Asian firms.

GII is also a play on power infrastructure in addition to the actual sale and production of electricity. Plus, this ETF yields over 4%.

A quantitative play: First Trust Utilities AlphaDEX ETF (NYSE: FXU): FXU takes a different approach by attempting to generate positive alpha relative to traditional passive style indices through the use of the AlphaDEX screening methodology, according to the ETF's profile.

This is not a pure play on utilities, but it is basically defensive as you'll find stocks like AT&T (NYSE: T) and CenturyLink (NYSE: CTL) among the top-10 holdings.

Another infrastructure play: First Trust NASDAQ CleanEdge Smart Grid Infrastructure Index Fund (Nasdaq: GRID): If you're betting on a boom in smart grid technology, GRID is your play. As an M&A play, GRID may be a bit speculative at this point, but could bear fruit down the road.

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Posted-In: News Sector ETFs Specialty ETFs Rumors M&A Pre-Market Outlook ETFs

 

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