ETF Showdown: Turning The Lights on to Utilities

In the search to avoid surging correlations and, well, just find a long position that is less bad than the broader market pickings are slim these days. One of the pickings is the utilities sector. In this market environment, utilities stocks and ETFs are the epitome of the boring is beautiful theme.

That much is highlighted by the performance of SPDR Select Sector Utilities (NYSE: XLU) over the past three months. Not only is XLU hovering barely more than $1 away from its 52-week high, including Friday's action, the ETF is up roughly 2% in the past three months. That's significantly less bad than the 10% slide for the S&P 500.

One thing about utilities ETFs is that they typically hold the same stocks, so picking up on slight differences is critical to finding the best option within this group. That means it's time for an ETF Showdown between XLU and the iShares Dow Jones U.S. Utilities Sector Index Fund (NYSE: IDU).

Let's just jump right to the heart of the matter and that is performance. Over the past three months XLU and IDU have moved in lockstep with each other. That means investors must search for other ways to decide which of these ETFs belongs in their portfolios.

The iShares Dow Jones U.S. Utilities Sector Index Fund sports an impressive $564 million in assets under management. Well, that would be impressive against most ETFs, but XLU is the rivaled king of utilities ETFs with over $6.4 billion in AUM.

For the investor that is hungry for a larger dose of utilities stocks, IDU is the better bet. The iShares ETF is home to 74 stocks, more than double XLU's 33 holdings. However, IDU's top-10 holdings account for 45% of the ETF's weight while XLU's top-10 selections represent roughly 35% of that ETF's weight.

Assuming you want that exposure to more stocks, you'll pay for it. IDU features and expense ratio of 0.47%. That's easily trumped by the 0.2% XLU offers. Both funds feature Southern (NYSE: SO), Dominion (NYSE: D), Duke (NYSE: DUK) and Exelon (NYSE: EXC) prominently.

So there's a lot to like with both funds, but XLU's expense ratio is too much to ignore when it comes to sector ETFs that are this similar. Add to that XLU's price tag is far lower than IDU's and XLU is optionable (IDU is not) and we have an easy winner for this week's showdown.