The growing oil disaster in the Gulf of Mexico has spilled into energy ETFs, but investors should see opportunity, as the
The BP (NYSE: BP) oil disaster in the
From an investment view, the oil spill has taken its toll on energy ETFs as offshore drilling and equipment stocks take a beating. The six-month drilling moratorium imposed by the
Given our strong appetite for oil to fuel our cars, run our airplanes and even heat our homes, those investments will bounce back some day, probably sooner rather than later.
But investors needn’t wait that long, as other pockets of the energy world remain quite prospective for energy investors. While the whole sector has taken a hit since the BP disaster, many alternatives are poised for a solid rebound, notably natural gas.
Effect Of The Oil Spill On Energy ETFs
The BP Deepwater Horizon rig sank into the Gulf of Mexico on April 22, a day before the
The largest energy ETF as measured by assets is the Energy Select Sector SPDR (NYSEArca: XLE), and since the day the rig sank, the ETF has lost 15 percent of its value. The second-largest energy ETF has been decimated by the oil disaster: The Oil Services HOLDRS ETF (NYSEArca: OIH) has fallen by 28.8 percent in six weeks.
The reason for the great disparity between the two ETFs is allocation. XLE is composed of 40 stocks, all based in the
Natural Gas ETFs Win
As deep-water drilling becomes more heavily scrutinized, the near-term and long-term outlook for the sector is questionable at best. It’ll have its day in the sun again as a value play because, realistically, we still need oil and we therefore still need to drill for it. But until the market fully accepts that, investors ought to turn their attention to alternative energy ETFs.
The biggest beneficiary of the entire disaster may be the on-shore drilling and natural gas companies. The
FCG is composed of a basket of mainly U.S.-based natural gas companies involved in exploring and producing natural gas. WCAT was introduced in January 2010 and has yet to really take off, but it’s an interesting idea. The ETF is composed of 60 small- and mid-cap stocks in the