Euphoria has spread across Wall Street as encouraging developments in the Euro zone coupled with positive economic data releases from the home front have helped lift the cloud of uncertainty looming over financial markets. With bullish momentum already on a roll, many are wondering how to favorably position their portfolios as the global recovery picks up steam. The energy sector in particular has been steaming with activity lately as signs of economic growth and geopolitical tensions in the Middle East have sparked a flurry of interest among traders and investors alike [see Energy Bull ETFdb Portfolio].
Energy giant Exxon Mobil recently took an in-depth look at how shifting demographics and advances in technology will impact the global energy market going forward. In the Outlook for Energy: A View to 2040, Exxon Mobil covers a wide array of fundamental factors that will have an impact on our economic landscape. In this report, several noteworthy trends are outlined, which may present themselves as compelling opportunities for those who wish to make a play in the energy sector.
With over 25 products to choose from in the Energy Equities ETFdb Category, some investors may feel overwhelmed by the sheer number of options available at their fingertips. Below we highlight three exchange-traded products that may offer investors a way of tapping into the key trends emphasized in Exxon Mobil’s energy outlook report:
1. iShares MSCI Global Energy Producers Fund (FILL)
The big picture is that global energy demand is expected to increase by about 30% in 2040 as compared to 2010. Consumption will be fueled thanks to increasing economic output across developed and emerging markets alike coupled with an ever-expanding world population. FILL presents itself as an appealing option for those who wish to establish broad-based exposure to the global energy sector. With over 300 holdings in total, this is by far the most diverse energy ETF available at the moment [see also Second MLP ETF Debuts].
From a sector breakdown perspective, exposure is tilted towards large cap integrated oil & gas companies. Firms involved in the exploration and production of fossil fuels receive the next largest allocation followed by refining companies. Despite having “global” in its name, FILL is biased towards domestic stocks; roughly half of the underlying portfolio is U.S. stocks, followed by securities from the U.K., Canada, France, and Brazil.
2. EG Shares Energy GEMS ETF (OGEM)
While energy demand in developed nations is expected to taper off in the coming years, the outlook for emerging markets is vastly different. Exxon estimates that energy demand from non-OECD countries (which excludes North America and Europe) will grow by close to 60%. China, India, and Latin America will be key drivers of energy demand as improvements in the standard of living and efficiency bolster consumption.
OGEM could present itself as an appealing tool for those who wish to gain access to the energy sector through emerging markets. This ETF holds 25 companies diversified across the following sectors: Oil & Gas Producers, Oil Equipment & Services, and Alternative Energy. Exposure is tilted towards giant and large cap size equities, while small and micro caps receive virtually no representation. Top holdings by country include: Russia, China, and Brazil [see In Search Of The Best Energy ETF].
3. First Trust ISE-Revere Natural Gas Index Fund (FCG)
Despite the worrisome downturn in natural gas prices, Exxon expects this fuel to play a key part in our economic landscape over the next several years. It is predicted that natural gas will grow fast enough to overtake coal as the second most popular fuel behind oil. In fact, Exxon estimates that natural gas demand will rise by more than 60% through 2040 [see Why You Should Sell UNG, Buy FCG].
FCG holds an equal-weighted basket of approximately 30 companies that derive a substantial portion of their revenues from the exploration and production of natural gas. The underlying portfolio is well diversified as large and mid cap size companies receive fairly equal allocations. From a country breakdown perspective, domestic securities account for nearly the entire portfolio, although some exposure to Canada, the U.K., and Norway is included [see FCG Fact Sheet].
Disclosure: No positions at time of writing.
- Exxon Mobil