With big oil earnings reports slated to roll in later this month, some investors may be looking for opportunity in the beaten-up energy sector. One way of accessing that opportunity without a full commitment is with the FlexShares Morningstar Global Upstream Natural Resource Index Fund (NYSEArca: GUNR).
GUNR provides exposure to the rising demand for natural resources and tracks global companies in the energy, metals and agriculture sectors while maintaining a core exposure to the timberlands and water resources sectors, is a part of the risk management theme.
Analysts also expect the volume of U.S. crude oil in storage should diminish in the weeks ahead before reversing course at the end of peak driving season, along with the start of the seasonal refinery maintenance period.
“Integrated oil companies have several business lines, making money from oil and gas production, refining, marketing, and other areas,” reports Avi Salzman for Barron’s. “Their fates in the coming quarter will depend partially on what kinds of products they produce because the trajectories of different kinds of energy and petroleum products have diverged in recent months.”
Going With GUNR
Real assets can enhance portfolio diversity will reducing correlations to traditional financial assets, such as stocks and bonds.
GUNR specifically identifies upstream natural resources equities based on a Morningstar industry classification system, with a balanced exposure to three traditional natural resource sectors, including agriculture, energy, and metals.
The FlexShares fund’s methodology is working this year. Year-to-date, GUNR is up 5.33% while the Energy Select Sector SPDR (NYSEArca: XLE), the largest equity-based energy ETF, is lower by half a percent.
When looking at the natural resources space and other hard asset producers, it is important to consider the various industries, such as the differences between the upstream and downstream components of the supply chain.
The $5.40 billion is also a credible income play with a trailing 12-month dividend yield of 3.57%, well above the comparable metric on the S&P 500.
For more information on the energy sector, visit our energy category.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. 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.