Oil and Energy stocks have been on quite a run in 2011 thus far. Tensions in the Middle East have certainly contributed to short-term volatility in oil prices and concerns about the longer-term stability of supplies.
The world of “energy-related” ETFs is vast and offers both the trader and investor a wide variety of liquid trading vehicles. This includes both petroleum-based commodities and companies as well as the wide variety of “alternative energy” including Coal, Nuclear, Solar and Wind. Let’s take a look at the 2011 performance of a selection of 10 of the biggest ETFs covering various niches in this sector:
Red – (USO) – US Oil
Green – (UNG) – US Natural Gas
Aqua – (UGA) – US Gasoline
Yellow – (OIH) – Oil Service HOLDRs
Blue – (TAN) – Guggenheim Solar
Dark Red – (FAN) – First Trust Wind Energy
Grey – (NLR) – Market Vectors Uranium & Nuclear
White – (KOL) – Market Vectors Coal
Purple – (PBW) – PowerShares Clean Energy
Orange – (GEX) – Market Vectors Alternative Energy
Relative ETF Performance Chart
What we see here is the wide diversity of both performance and coverage of these “Energy” ETFs. The top 2011 performers include both alternative energy stock baskets (NYSE:TAN) (NYSE:FAN), gasoline commodity (NYSE:UGA), and major oil services companies (NYSE:OIH). And the spread between the gains of the top performers tracked above and the losers is nearly 30% for just the first quarter of this year alone.
Bringing up the rear performance-wise are a wide variety of sectors within the vast sector known as Energy: fairly obvious ones are Nuclear/Uranium (NYSE:NLR), obviously affected by the problems in Japan and Natural Gas Commodity (NYSE:UNG), which has been a laggard for some time. But additionally we see Coal (NYSE:KOL) and Crude Oil Commodity (NYSE:USO) as relative laggards.
And then we come to (NYSE:PBW) and (NYSE:GEX), which have similar sounding names as Broad-Based Alternative/Clean Energy trading vehicles. As usual, our oft-noted “know your ETF” is a major factor here …the 2011 performance is vastly different between the two, GEX up 13% YTD, PBW up 3%. We advise to use simple sites like Yahoo Finance to compare and examine the Top 10 Holdings, investing profile, trading liquidity (bid/ask spreads on both the underlying and its options) and fees of ETFs before investing.
The world is always going to need energy going forward, and it’s likely to be provided in a variety of forms and methods (hydro/water being another one not mentioned above), and being in the “winning” areas/stocks/funds/sectors/ETFs will allow investors to outperform in the coming years. The performance variety in this sector is very wide and will reward the best “stock/sector/ETF” pickers.
Moby Waller is a former CBOE Market Maker floor trader and London-based European Index Options Trader off the floor. He now works with BigTrends.com and is a Research Analyst and Portfolio Manager for BigTrends.com’s Index Options Timer. Index Options Timer (IOT) is a subscription-based program that offers real-time trade recommendations on SPY, QQQQ, and IWM options based on various trading systems and signals that Moby has created.
BigTrends.com, which provides investors with specific real-time stock and options strategies and investment education to profit from significant market trends.