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3 Top Energy Mutual Funds That Are Worth a Buy Now
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Crude oil prices skyrocketed in the first half of 2022 on supply concerns. Russia’s invasion of Ukraine and an unflinching OPEC+ that refused to raise production, and cut it instead, ensured that the energy sector was making massive profits around the world amid low supply, and depletion of global oil inventories. High energy prices were what fueled the broad-based inflation in 2022 that affected consumer budgets.
In the second half, crude oil prices generally decreased as fear of an impending recession reduced demand. Also, severe COVID-19 restrictions in China contributed to lower global petroleum demand. On Dec 8, the price of Brent crude reached the lowest 2022 price, at $75/barrel. So, at the onset of 2023, whether the energy sector could continue the momentum that made it the most profitable sector in 2022 by a country mile was a million-dollar question.
While oil prices were on a steady path, a surprise decision by OPEC+ producers to voluntarily cut output at the beginning of April had pushed forecasts up to $100/barrel again. However, the regional banking crisis and talks of an impending recession have pushed them down again, with prices often hovering below the December 2022 levels.
A lot depended on the Federal Reserve’s May meeting, where anything short of an assurance that the rate-hike cycle was coming to an end, would have hit the energy sector hard. Fortunately for the sector, even as a 25-bps interest rate hike was announced at the end of the meeting, comments from important officials suggested that the cycle was indeed nearing its end.
Oil prices rose more than 2% on Monday, May 8, after rising 4% on Friday, as U.S. recession fears eased on a strong U.S. jobs report and the pragmatic posture taken up by the Fed. Even regional banking stocks staged a massive comeback last Friday in the hope that prudent policy measures taken up by the government would be able to fish the sector out of the ongoing crisis. The upward movement of oil prices follows three straight weeks of decline. On Monday, Brent crude settled up $1.71, or 2.3%, at $77.01/barrel. WTI crude also gained $1.82, or 2.6%, to settle at $73.16.
It would be reasonable to infer that this is a classic case of buy-the-dip for the sector, as oil prices are at an extremely agreeable level currently and are poised only to go up later in the year.Hence, astute investors should now invest in energy mutual funds having oil companies as their major holdings. Mutual funds, in general, reduce transaction costs and diversify portfolios without an array of commission charges that are mostly associated with stock purchases (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
We have thus selected three mutual funds that boast a Zacks Mutual Fund Rank #1 (Strong Buy), 2 (Buy), have positive three-year and five-year annualized returns, minimum initial investments within $5000, and carry a low expense ratio.
Vanguard Energy Fund (VGENX - Free Report) invests the majority of its net assets in common stocks of companies primarily engaged in activities in exploration, production, and transmission of energy or energy fuels, energy research, and energy conservation or pollution control.
G. Thomas Levering has been the lead manager of VGENX since Jan 16, 2020, and 52.6% of the fund’s exposure is to the energy sector, primarily in oil exploration and production. Three major holdings for the fund are 7.9% in ConocoPhillips, 4.2% in BP and 3.7% in TotalEnergies.
VGENX’s 3-year and 5-year annualized returns are 22.4% and 0.7%, respectively. Its net expense ratio is 0.43% compared to the category average of 1.07%. VGENX has a Zacks Mutual Fund Rank #2. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
Cavanal Hill World Energy Fund (AIWEX - Free Report) invests the majority of its total assets in a wide range of energy-related financial instruments issued in the United States and markets around the world. Investments made by AIWEX usually include a combination of common stock, bonds, exchange-traded funds, and exchange-traded notes, but may include other asset types related to energy industry activities.
Michael P. Maurer has been the lead manager of AIWEX since Feb 3, 2014, and 61.2% of the fund’s exposure is to the energy sector, primarily in oil exploration and production. Three top holdings for the fund are 6.7% in Occidental Petroleum, 4.3% in Halliburton and 3.8% in Exxon Mobil.
AIWEX’s 3-year and 5-year annualized returns are 39.8% and 8.7%, respectively. Its net expense ratio is 0.90% compared to the category average of 1.07%. AIWEX has a Zacks Mutual Fund Rank #2.
Fidelity Select Energy (FSENX - Free Report) seeks capital appreciation by investing the majority of its assets in common stocks of companies principally engaged in the energy field, including the conventional areas of oil, gas, electricity, and coal, and newer sources of energy. FSENX offers dividends and capital gains in the month of April and December.
Maurice FitzMaurice has been the lead manager of FSENX since Jan 1, 2020, and 81.1% of the fund’s exposure is to the energy sector, primarily in oil exploration and production. Three major holdings for the fund are 22.5% in Exxon Mobil, 6.9% in Chevron and 5.1% in ConocoPhillips.
FSENX’s 3-year and 5-year annualized returns are 51% and 7.3%, respectively. Its net expense ratio is 0.73% compared to the category average of 1.38%. FSENX has a Zacks Mutual Fund Rank #1.
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3 Top Energy Mutual Funds That Are Worth a Buy Now
Crude oil prices skyrocketed in the first half of 2022 on supply concerns. Russia’s invasion of Ukraine and an unflinching OPEC+ that refused to raise production, and cut it instead, ensured that the energy sector was making massive profits around the world amid low supply, and depletion of global oil inventories. High energy prices were what fueled the broad-based inflation in 2022 that affected consumer budgets.
In the second half, crude oil prices generally decreased as fear of an impending recession reduced demand. Also, severe COVID-19 restrictions in China contributed to lower global petroleum demand. On Dec 8, the price of Brent crude reached the lowest 2022 price, at $75/barrel. So, at the onset of 2023, whether the energy sector could continue the momentum that made it the most profitable sector in 2022 by a country mile was a million-dollar question.
While oil prices were on a steady path, a surprise decision by OPEC+ producers to voluntarily cut output at the beginning of April had pushed forecasts up to $100/barrel again. However, the regional banking crisis and talks of an impending recession have pushed them down again, with prices often hovering below the December 2022 levels.
A lot depended on the Federal Reserve’s May meeting, where anything short of an assurance that the rate-hike cycle was coming to an end, would have hit the energy sector hard. Fortunately for the sector, even as a 25-bps interest rate hike was announced at the end of the meeting, comments from important officials suggested that the cycle was indeed nearing its end.
Oil prices rose more than 2% on Monday, May 8, after rising 4% on Friday, as U.S. recession fears eased on a strong U.S. jobs report and the pragmatic posture taken up by the Fed. Even regional banking stocks staged a massive comeback last Friday in the hope that prudent policy measures taken up by the government would be able to fish the sector out of the ongoing crisis. The upward movement of oil prices follows three straight weeks of decline. On Monday, Brent crude settled up $1.71, or 2.3%, at $77.01/barrel. WTI crude also gained $1.82, or 2.6%, to settle at $73.16.
It would be reasonable to infer that this is a classic case of buy-the-dip for the sector, as oil prices are at an extremely agreeable level currently and are poised only to go up later in the year.Hence, astute investors should now invest in energy mutual funds having oil companies as their major holdings. Mutual funds, in general, reduce transaction costs and diversify portfolios without an array of commission charges that are mostly associated with stock purchases (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
We have thus selected three mutual funds that boast a Zacks Mutual Fund Rank #1 (Strong Buy), 2 (Buy), have positive three-year and five-year annualized returns, minimum initial investments within $5000, and carry a low expense ratio.
Vanguard Energy Fund (VGENX - Free Report) invests the majority of its net assets in common stocks of companies primarily engaged in activities in exploration, production, and transmission of energy or energy fuels, energy research, and energy conservation or pollution control.
G. Thomas Levering has been the lead manager of VGENX since Jan 16, 2020, and 52.6% of the fund’s exposure is to the energy sector, primarily in oil exploration and production. Three major holdings for the fund are 7.9% in ConocoPhillips, 4.2% in BP and 3.7% in TotalEnergies.
VGENX’s 3-year and 5-year annualized returns are 22.4% and 0.7%, respectively. Its net expense ratio is 0.43% compared to the category average of 1.07%. VGENX has a Zacks Mutual Fund Rank #2. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
Cavanal Hill World Energy Fund (AIWEX - Free Report) invests the majority of its total assets in a wide range of energy-related financial instruments issued in the United States and markets around the world. Investments made by AIWEX usually include a combination of common stock, bonds, exchange-traded funds, and exchange-traded notes, but may include other asset types related to energy industry activities.
Michael P. Maurer has been the lead manager of AIWEX since Feb 3, 2014, and 61.2% of the fund’s exposure is to the energy sector, primarily in oil exploration and production. Three top holdings for the fund are 6.7% in Occidental Petroleum, 4.3% in Halliburton and 3.8% in Exxon Mobil.
AIWEX’s 3-year and 5-year annualized returns are 39.8% and 8.7%, respectively. Its net expense ratio is 0.90% compared to the category average of 1.07%. AIWEX has a Zacks Mutual Fund Rank #2.
Fidelity Select Energy (FSENX - Free Report) seeks capital appreciation by investing the majority of its assets in common stocks of companies principally engaged in the energy field, including the conventional areas of oil, gas, electricity, and coal, and newer sources of energy. FSENX offers dividends and capital gains in the month of April and December.
Maurice FitzMaurice has been the lead manager of FSENX since Jan 1, 2020, and 81.1% of the fund’s exposure is to the energy sector, primarily in oil exploration and production. Three major holdings for the fund are 22.5% in Exxon Mobil, 6.9% in Chevron and 5.1% in ConocoPhillips.
FSENX’s 3-year and 5-year annualized returns are 51% and 7.3%, respectively. Its net expense ratio is 0.73% compared to the category average of 1.38%. FSENX has a Zacks Mutual Fund Rank #1.
Want key mutual fund info delivered straight to your inbox?
Zacks' free Fund Newsletter will brief you on top news and analysis, as well as top-performing mutual funds, each week. Get it free >>