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Energy stocks are up.
A series of coordinated attacks that destroyed more than half of Saudi Arabia's oil supply caused the sharpest rise in Brent crude prices in history this past week. end, prompting a general upturn in the energy sector on Monday, while major averages were down for the first time in nine days.
Prices for Brent, the international benchmark for oil, and US crude West Texas Intermediate climbed more than 12% on Monday. Energy Select SPDR, an exchange-traded fund that stocks 28 large-cap energy stocks under the symbol XLE, has risen more than 3%.
Of all the subgroups in the energy space – including oil service companies, refiners and producers, among others – one in particular stood out from CFRA and its fund research manager. Mutual Funds and Mutual Funds, Todd Rosenbluth.
"We are more supportive for exploration and production companies", most of which are found in the SPDR S & P Oil & Gas Exploration & Production (XOP) ETF, said Monday Rosenbluth in "ETF Edge "of CNBC. The XOP was up nearly 11% near the end of Monday's trading session.
"Some of these small cap companies … [have] More debt, lower cash flow, "said Rosenbluth. This has really been a boost for them, an unexpected jolt from the point of view of supply, and it could take a little while. [to play out]. "
At the same time, Rosenbluth urged investors to "ensure their diversification", particularly given the pitfalls of a fund like XLE, which holds 45% of its portfolio in two shares: Exxon Mobil and Chevron.
But some investors are grappling with even greater concern, said Tom Lydon, president of Global Trends Investments and publisher and owner of the ETF ETFTrends.com ETF industry website.
When the attacks took place over the weekend, "investors were doing their homework because we saw a sharp increase not only in long-term buyer ETFs, but also leveraged and inverse ETFs," he said. said Lydon about the tracking information on his website. same interview "ETF Edge".
So, while some were interested in the long-term prospects of investing in a fund such as the XLE or the United States Oil Fund, the USO ticker, which tracks the crude oil itself, others were turning to more aggressive directional transactions, said Lydon.
"There was a balance between investors thinking that there might be another long-term game here if we had more tension abroad, but also, if this thing is just an opportunity without a future there is an opportunity here to maybe lower the price of oil if it goes back, "he said.
VelocityShares 3x Inverse Crude Oil from Citigroup Global Markets, a leveraged fund used to sell oil prices short, hit a new 52-week low on Monday after falling by nearly 40%. Long Crude VelocityShares 3x Long Crude crude oil from Citigroup Global Markets – another leveraged ETF used to trade oil upwards – grew more than 34%.
"The big question is, … going forward, is there one and it's over or are we going to see more?" Lydon repeated. "Many investors think that this could be the case, so they benefit."
And though he insisted that it was mainly "short-term" operations, "Lydon also had a long-term eye.
"[Energy stocks are] undervalued, and prices in general are low, "he said. We have seen what can happen with a great catastrophe, this event that has happened. So, to get to the bottom, we are long-term investors, of course. We encourage people to be long term, but there is an exchange right now and people are definitely benefiting. "
And the health of the entire economy will determine the longevity of this trade, said Rosenbluth.
"Supply and demand are obviously the key element of the energy space," said Rosenbluth. "Now we have seen the supply decline a bit, demand continues to behave well, and if we see a strong global economy, we could see it continue."
President Donald Trump said Monday afternoon that he was in no hurry to react to attacks on Saudi Arabia's oil reserves, which cut global production by more than 5% crude oil.
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