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3 Energy Mutual Funds to Buy as OPEC+ Cuts Production Again
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Crude oil prices went over the roof in the first half of 2022 on supply concerns. Russia’s invasion of Ukraine and the OPEC+ refusal to raise production ensured that the energy prices went up. Countries started to use up their reserves, thereby depleting global oil inventories.
However, since peaking in March 2022, energy prices were on a slow downward path, before a surprise decision by OPEC+ producers to voluntarily cut output in April 2023 pushed crude futures up to $100/barrel again. The regional banking crisis and talks of an impending recession aided in bringing levels down. China, too, helped bring prices down by not remaining open for business for a significant amount of time during this period. Given that China is one of the world’s largest oil importers, demand subsides when it is not buying oil.
But prices are going up again. In July, WTI crude prices went up by 16%. Saudi Arabia cut production by another 1 million barrels/day, thereby pushing supply down. The decision came in at a time when U.S. crude reserves hit a 41-year low, falling by 17.1 million barrels/week for the week ending Jul 28. If this continues, it will push inflation up again.
Oil prices have hovered near their highest levels since April in recent sessions. They are back on a steady upward trajectory, with both key benchmarks notching up their sixth consecutive weekly gains last week. On Aug 7, Brent crude slipped $0.24 to $86/barrel in the morning, while WTI crude was at $82.55/barrel, down $0.27.
It can be reasonable to argue that with no apparent signs of China coming to the rescue again, oil prices might continue to go up in the foreseeable future. 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.
Franklin Natural Resources Fund (FRNRX - Free Report) invests the majority of its net assets in equity and debt securities of companies in the natural resources sector. FRNRX invests a significant portion of its assets in smaller-capitalization companies.
Steve M. Land has been the lead manager of FRNRX since Mar 31, 1999. Three major holdings for the fund are 4.4% in ConocoPhillips, 4% in Exxon Mobil and 3.8% in Chevron.
FRNRX’s 3-year and 5-year annualized returns are 27.7% and 1.8%, respectively. Its net expense ratio is 0.96% compared to the category average of 1.11%. FRNRX 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.
T. Rowe Price New Era Fund (PRNEX - Free Report) invests the majority of its assets in common stocks of companies in the natural resource sector, the earnings and tangible assets of which may benefit from periods of accelerating inflation.
Shinwoo Kim has been the lead manager of PRNEX since May 31, 2021. Three top holdings for the fund are 3.7% in TotalEnergies, 2.8% in ConocoPhillips and 2.8% in Exxon Mobil.
PRNEX’s 3-year and 5-year annualized returns are 18.5% and 4.6%, respectively. Its net expense ratio is 0.74% compared to the category average of 1.11%. PRNEX has a Zacks Mutual Fund Rank #1.
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 April and December.
Maurice FitzMaurice has been the lead manager of FSENX since Dec 31, 2019. Three major holdings for the fund are 24.6% in Exxon Mobil, 6.6% in Chevron and 5.2% in Valero Energy.
FSENX’s 3-year and 5-year annualized returns are 37.8% and 4.6%, respectively. Its net expense ratio is 0.73% compared to the category average of 1.07%. FSENX has a Zacks Mutual Fund Rank #1.
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3 Energy Mutual Funds to Buy as OPEC+ Cuts Production Again
Crude oil prices went over the roof in the first half of 2022 on supply concerns. Russia’s invasion of Ukraine and the OPEC+ refusal to raise production ensured that the energy prices went up. Countries started to use up their reserves, thereby depleting global oil inventories.
However, since peaking in March 2022, energy prices were on a slow downward path, before a surprise decision by OPEC+ producers to voluntarily cut output in April 2023 pushed crude futures up to $100/barrel again. The regional banking crisis and talks of an impending recession aided in bringing levels down. China, too, helped bring prices down by not remaining open for business for a significant amount of time during this period. Given that China is one of the world’s largest oil importers, demand subsides when it is not buying oil.
But prices are going up again. In July, WTI crude prices went up by 16%. Saudi Arabia cut production by another 1 million barrels/day, thereby pushing supply down. The decision came in at a time when U.S. crude reserves hit a 41-year low, falling by 17.1 million barrels/week for the week ending Jul 28. If this continues, it will push inflation up again.
Oil prices have hovered near their highest levels since April in recent sessions. They are back on a steady upward trajectory, with both key benchmarks notching up their sixth consecutive weekly gains last week. On Aug 7, Brent crude slipped $0.24 to $86/barrel in the morning, while WTI crude was at $82.55/barrel, down $0.27.
It can be reasonable to argue that with no apparent signs of China coming to the rescue again, oil prices might continue to go up in the foreseeable future. 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.
Franklin Natural Resources Fund (FRNRX - Free Report) invests the majority of its net assets in equity and debt securities of companies in the natural resources sector. FRNRX invests a significant portion of its assets in smaller-capitalization companies.
Steve M. Land has been the lead manager of FRNRX since Mar 31, 1999. Three major holdings for the fund are 4.4% in ConocoPhillips, 4% in Exxon Mobil and 3.8% in Chevron.
FRNRX’s 3-year and 5-year annualized returns are 27.7% and 1.8%, respectively. Its net expense ratio is 0.96% compared to the category average of 1.11%. FRNRX 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.
T. Rowe Price New Era Fund (PRNEX - Free Report) invests the majority of its assets in common stocks of companies in the natural resource sector, the earnings and tangible assets of which may benefit from periods of accelerating inflation.
Shinwoo Kim has been the lead manager of PRNEX since May 31, 2021. Three top holdings for the fund are 3.7% in TotalEnergies, 2.8% in ConocoPhillips and 2.8% in Exxon Mobil.
PRNEX’s 3-year and 5-year annualized returns are 18.5% and 4.6%, respectively. Its net expense ratio is 0.74% compared to the category average of 1.11%. PRNEX has a Zacks Mutual Fund Rank #1.
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 April and December.
Maurice FitzMaurice has been the lead manager of FSENX since Dec 31, 2019. Three major holdings for the fund are 24.6% in Exxon Mobil, 6.6% in Chevron and 5.2% in Valero Energy.
FSENX’s 3-year and 5-year annualized returns are 37.8% and 4.6%, respectively. Its net expense ratio is 0.73% compared to the category average of 1.07%. 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 >>