The Best Oil ETF to Invest in Today
The best oil ETF profit play is the First Trust North American Energy Infrastructure Fund(NYSE Arca: EMLP). First Trust holds 69 stocks, representing a wide range of American and Canadian energy companies.
Most of EMLP’s holdings are midstream master limited partnerships (MLPs). These companies aren’t as exposed to low oil prices because they derive at least 50% of their revenue from storage and transportation infrastructure. These “marketproof” holdings are like tollbooth collectors at a bridge, collecting fees as long as oil keeps flowing.
“When you invest in the midstream, you’re far less susceptible to price fluctuations in the underlying commodity, and you are able to collect easy profits from the growing demand in fuels,” Money Morning Global Energy Strategist Dr. Kent Moors explained.
First Trust has $1.2 billion in net assets and became the first oil ETF to hit the $1 billion asset mark. Morningstar Inc. (Nasdaq: MORN) rated it the best “equity energy” ETF last year after it saw a one-year total return of 23.8%.
Not to mention it’s reaping benefits from the largest MLP merger of the year…
Energy Transfer Partners LP (NYSE: ETP), one of EMLP’s largest holdings, acquired Regency Energy Partners (NYSE: RGP) on April 30. The $18 billion deal made Energy Transfer Partners the second-largest MLP on the market.
Despite being down 6% this year, EMLP has gained 2.1% since June 12. That means it’s in the early stage of a strong rebound as oil prices near the $70 range by the end of 2015.
“Absent any major geopolitical tension, beyond the levels we’re already seeing, oil prices should begin to level off,” Moors noted. “Oil won’t have to hit triple digits to hand us some fantastic new opportunities.”
The Bottom Line: Most oil index ETFs like USO and UCO have fallen hard in the last year. These are not the best oil ETFs due to the market’s ongoing state of contango. The most profitable oil funds focus on “marketproof” midstream companies that make money no matter what the market does. With a diverse collection of midstream holdings, the First Trust North American Energy Infrastructure Fund is the best oil ETF to buy now.
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