After two years of dismal performances, the energy sector, the seventh-largest sector weight in the S&P 500, is on the mend. Making the sector’s rebound this year all the more impressive is that it comes against the backdrop of still low oil prices, little help in the way of significant production cuts and massive spending reductions by global oil majors.
There are plenty of factors to consider before coming to the conclusion that oil and the related exchange traded products are completely out of the woods. Earlier this month, Saudi Arabia and Iran failed to find common ground during the oil freeze talks in Doha, Qatar.
The energy sector has suffered some of the most pessimistic first quarter projections, which leaves the oil producers a lot of room to surprise on the upside. In fact, some traders are betting on more upside for the once downtrodden energy patch. As oil prices drag on oil company shares, the correlation between stocks and oil potentially weakened to some extent, which may have benefited broad benchmark investments in the event of further crude oil weakness.
Oil majors have tightened their belts, reducing costs by laying off thousands of workers and halted many new projects. Large integrated oil companies are expected to hold up better than drilling stocks as these giants have both upstream exploration and production, along with downstream refining operations.
For investors considering tactical exposure to energy ETFs, we’ve compiled a list of funds ranging from the well-known to some hidden gems.
Traditional Cap-Weighted Energy ETFs
- Energy Select Sector SPDR (NYSEArca: XLE)
- Vanguard Energy ETF (NYSEArca: VDE)
- iShares U.S. Energy ETF (NYSEArca: IYE)
- Fidelity MSCI Energy Index ETF (NYSEArca: FENY)
Equal-Weight and Smart Beta Energy ETFs
- Guggenheim S&P Equal Weight Energy ETF (NYSEArca: RYE)
- SPDR S&P Oil & Gas Exploration & Production ETF (NYSEArca: XOP)
- PowerShares Dynamic Energy Exploration & Production Portfolio (NYSEArca: PXE)
- PowerShares DWA Energy Momentum Portfolio (NYSEArca: PXI)
Oil Services ETFs
- Market Vectors Oil Service ETF (NYSEArca: OIH)
- SPDR Oil & Gas Equipment & Services ETF (NYSEArca: XES)
- PowerShares Dyanmic Oil and Gas Service ETF (NYSEArca: PXJ)
- iShares U.S. Oil Equipment & Services ETF (NYSEArca: IEZ)
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.