Energy stocks and the exchange traded funds that hold those issues are trading lower, but they look a lot better than the broader market.
At this writing, only five of the Dow Jones Industrial Average’s 30 members are trading higher with one being Chevron (NYSE: CVX), the second largest U.S. oil company and a major holding in an array of well-known energy ETFs. Friday is not an outlier, either.
Hampered by the declines in biotechnology, Internet and other momentum stocks, the major U.S. indices have struggled since the start of March. The same cannot be said of the energy sector. Investors, lured by compelling valuations, rushing into the sector. Energy ETFs were among the leading sector funds in terms of first-quarter inflows. [Buyers Lured to Energy ETFs]
Since the start of March, the Energy Select Sector SPDR (NYSEArca: XLE), the Vanguard Energy ETF (NYSEArca: VDE) and the iShares U.S. Energy ETF (NYSEArca: IYE) are up an average of 2.5%
XLE, the largest energy ETF by assets, “scored a textbook breakout March 28 by closing above the top of a five-month trading range. It continued higher until the Federal Reserve-induced selloff on April 4, and within two days tested its breakout,” writes Michael Kahn for Barron’s.
Barron’s notes ConocoPhillips (NYSE: COP), the largest independent oil and natural gas producer in the U.S., has been seeing new buyers come in and “has actually been rallying for two months and broke through a trendline in late February.” After settling litigation related to Tronox (NYSE: TROX), shares of Anadarko Petroleum (NYSE: APC) are up more than 16% in the past month. Conoco and Anadarko are both top-10 holdings in XLE, combining for nearly 7% of the ETF’s weight. [An Oil ETF Breaks Out]
Anadarko is also a top-10 holding in the First Trust ISE-Revere Natural Gas Index Fund (NYSEArca: FCG), the top-performing non-leveraged energy ETF over the past month. FCG has also been outperforming natural gas futures by a wide margin. [Nat Gas ETF Finally Beats Commodity]
“From the long-term perspective, it completed a bullish ‘flag’ pattern, as well, and the trend remains up. That should help natural gas stocks, too,” Barron’s said of the United States Natural Gas Fund (NYSEArca: UNG).
Energy Select Sector SPDR
