ETF Talk: Energize Your Portfolio

Doug Fabian

Doug Fabian is known for his expert knowledge of ETFs, bear funds and enhanced index funds to profit in any market climate.

To build upon last week’s ETF Talk theme of sectors that offer steady and consistent growth, albeit generally at a slow pace, this week’s article focuses on the energy sector. People always need to use energy. With the rapid development of countries such as China, worldwide demand for energy should continue to increase. An exchange-traded fund (ETF) that includes a heavy concentration of gasoline companies is PowerShares Dynamic Energy Exploration & Production (PXE).

This non-diversified fund seeks investment results which, before fees and expenses, correspond generally to the price and yield of the Dynamic Energy Exploration & Production IntellidexSM Index. That index is composed of stocks from 30 U.S. companies involved in the exploration and production of natural resources used to produce energy.

PXE had a strong year in 2012, rising 22%, and it’s up almost 2% in just the first few weeks this year. It also offers an annual yield of 2.13%. Thus, PXE gives investors income, as well as the potential of capital appreciation from its rising share price. The demand for energy, including oil, continues to rise both at home and abroad. With that trend intact, look for the steady gains of PXE to continue.

As an energy sector ETF, you would expect PXE to be heavily weighted in that sector. You would be correct: 97.26% of PXE’s holdings in energy, with the balance in the utilities sector. As for specific companies, the ETF’s top ten holdings make up 49.55% of its total assets. The top five companies held, in order, are: Phillips 66 Common Stock, 6.31%; Marathon Petroleum Corporation, 5.82%; Valero Energy Corporation Common, 5.22%; Exxon Mobil Corporation Common, 5.11%; and ConocoPhillips Common Stock, 5.08%.

Exclusive  Easy Exposure to the Commodities Market

Although the fund had a slight drop in price last summer, it has more than recovered. In fact, PXE has done very well since the Great Recession just a few years ago. Look for this sector fund to continue its ascent in the coming months.

If you want my advice about buying and selling specific ETFs, including appropriate stop losses, please consider subscribing to my Successful Investing newsletter. As always, I am happy to answer any of your questions about ETFs, so do not hesitate to email me by clicking here. You just may see your question answered in a future ETF Talk.

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Following yesterday’s advance, U.S. stocks were little changed, and a rally in Apple Inc. tempered economic concern after the World Bank downgraded global growth forecasts.

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