Utilities stocks are those who deal in services like water, electricity, gas, and other critical infrastructure.

Recently, alternative energy has been added as a sub-sector due to its incremental rise in importance. Utilities are categorized as non-cyclical - even if the economy is in a recession, people still need water and electricity.

For that reason, they are often treated as defensive stocks, which investors hope will outperform during more difficult economic times. There is little competition in the utilities sector, as the barrier to entry is generally extremely high for a new entrant, given the amount of infrastructure required.

In fact, the government allows some utilities companies to operate as monopolies.

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