Categories: Commodity ETFsOil & Gas

ETF Talk: Natural Gas Shows Signs of Recovery

As spring continues to bloom, even the natural gas markets are showing signs of coming back to life after hitting their lowest point of the year. One exchange-traded fund (ETF) in particular that I have noticed start to climb again is SPDR S&P Oil & Gas Equipment & Services ETF (XES). In the wake of an unseasonably warm winter, which was one of the main reasons why natural gas prices fell, the fund has bottomed out and is likely to rise steadily during the next several weeks.

After beginning the year at a strong $36.01, XES fell to $33.75 yesterday. It has risen since then and as of midday today the fund traded at $34.24.

Established in June 2006, XES seeks to replicate, before expenses, the total returns of the S&P Oil & Gas Equipment & Services Select Industry Index. As a result of the fund’s wide investment in the oil and gas industry, XES has the potential to notch significant gains as long as the natural gas market recovers from its deep decline. Again, my hope is that after taking a battering in the first quarter, natural gas has nowhere to go but up.

The top five holdings in XES, as of the close of trading on April 17, are: Core Laboratories (CLB), 2.83%; National Oilwell Varco Inc. (NOV), 2.66%; Hornbeck Offshore Services Inc. (HOS), 2.66%; Seacor Holdings Inc. (CKH), 2.65%; and Lufkin Industries Inc. (LUFK), 2.73%. If the markets recover as I hope, XES offers the promise of producing significant gains.

Even among other natural gas investments, SPDR S&P Oil & Gas Equipment & Services ETF (XES) remains attractive. It is not tied to a narrow niche within the Oil and Gas Industry, since XES includes holdings in equipment and services (72.73%), as well as drilling (27.27%). In addition, the fund is low-cost and low-turnover. If you are like me, you like bargains. Without any doubt, I am an avowed fan of investment firms that charge low fees for managing funds.

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Doug Fabian

Doug Fabian is the Editor of Weekly ETF Report, a free weekly e-newsletter, and the newsletter Successful ETF Investing. He’s also the host of the syndicated radio show, “Doug Fabian’s Wealth Strategies.” Doug also edits the fast-paced trading service ETF Trader’s Edge, for investors who want to take their profits to the next level. Taking over the reins from his dad, Dick Fabian, back in 1992, Doug has continued to uphold the reputation of the newsletter as the #1 risk-adjusted market timer as ranked by Hulbert’s Investment Digest. Doug became a member of the “SmartMoney 30” in 1999 — a listing of the most influential individuals in the mutual fund industry. In the feature, SmartMoney magazine exclaims that Doug is the best-known “trend follower” among the $56 billion (and growing) group of financial advisors. In 2001, Doug wrote “Maverick Investing,” published by McGraw-Hill. He also regularly appears at seminars around the country, stands out on the pages of the largest newspapers (The Wall Street Journal, The Los Angeles Times, and The New York Times), and speaks on national television (CNBC, Fox News, and Bloomberg Forum). For more than 35 years, Successful ETF Investing (formerly the Telephone Switch Newsletter and Successful Investing) has produced double-digit percentage annual gains. Doug has become known for his expert knowledge and timely use of innovative tools, such as exchange-traded funds, bear funds, and enhanced-index funds to profit in any market climate. For more information about Doug’s services, go to http://www.fabian.com/