3 Energy Funds to Buy Amid Keystone XL Debate

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The Keystone XL pipeline debate has been around for a while. The latest development has now brought a new challenge for Obama. Louisiana Democrat Mary Landrieu and North Dakota Republican John Hoeven have introduced pro-Keystone XL bill bypassing the President’s nod. Thus, work is supposed to begin immediately for 1,660-mile pipeline construction. The vote is expected early next week, result of which is uncertain.

The Keystone XL pipeline, if approved, would connect the oil sands of Alberta to the US Gulf. Proponents of the project cite job creation and economic benefits, while detractors point at environmental costs as well as the dangers associated with pipelines. However, the proposed Keystone XL oil pipeline expansion has got both Democrats and Republicans fired up. The choice between Republican pragmatism and greener Democrats is a tough call for the incumbent White House.
Obama administration is reported to have been delaying the project.

The construction phase would generate more than 40,000 temporary jobs but fewer than 100 permanent positions after the pipeline is put in place. Critics have also pointed out that if a pipeline extension is not permitted, the U.S. would have to rely more on foreign sources like Venezuela. The Republicans, along with a cross section of Democrats, are pushing for approval of the pipeline which they believe would pump the U.S. economy with multi-millions in revenues.

Several energy firms are expected to benefit from the pipeline. The beneficiaries include Valero Energy Corporation and ExxonMobil Corporation. This is particularly true because there is busy trade between the Western Canadian Select (:WCS) hub and the U.S. Gulf Coast regardless of whether or not the pipeline is approved by President Obama.

Among the broader advantages for the energy sector, positive economic data and geopolitical fears have helped oil prices stay above the major psychological threshold of $100 per barrel. The immediate outlook for oil, however, remains positive given the commodity’s constrained supply picture. In particular, while the Western economies exhibit sluggish growth prospects, global oil consumption is expected to get a boost from sustained strength in China, which continue to expand at a healthy rate despite some moderation.

Thus, investors may consider some top ranked energy funds at this point. It’s a good idea to focus on energy sector funds that have a healthy year-to-date return. Then one should zero-in on funds that sport a Zacks Mutual Fund Rank #1 (Strong Buy). Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance, but the likely future success of the fund.

BlackRock Energy & Resources Investor A (SSGRX) seeks capital appreciation over the long run. It invests a lion’s share of its assets in small cap companies related to sectors including energy, natural resources and utilities. The fund has no limit on number of companies it can invest in, but it will invest in a minimum of three countries. The fund has returned 9.8% year-to-date and 26.9% over the last one year.Top holdings include EOG Resources Inc, Cimarex Energy Co and Consol Energy Inc.

Fidelity Advisor Energy A (FANAX) invests a lion’s share of its assets in companies associated with the energy sector. These companies may deal with both conventional and newer sources of energy like nuclear and solar power among others. It invests in companies irrespective of their location. Company’s financial condition, industry rank and overall market condition are considered for investment decisions. The fund has returned 7.8% year-to-date and 23.8% over the last one year. Top holdings include Exxon Mobil Corporation, Chevron Corp and EOG Resources Inc.

Vanguard Energy (VGENX) seeks capital growth on a long-term basis. Majority of the investment are parked in companies whose primary operations are involved in energy and energy fuels. The fund may also invest all its assets in foreign companies. The fund has returned 7.9% year-to-date and 22.6% over the last one year. Top holdings include Exxon Mobil Corporation, Chevron Corp and Royal Dutch Shell PLC ADR Class A.

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