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3 Energy Mutual Funds to Buy on Continued Geopolitical Issues
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Crude oil prices touched the ceiling in 2022 on concerns over supply, as Russia invaded Ukraine and the OPEC+ refused to raise production. Global oil inventories started to get depleted, with nations using them up to keep oil and gas prices at a level of sanity. Following an eventual period of slowing down, crude prices hit the $100/barrel level again in April 2023 after a surprise decision by OPEC+ producers to voluntarily cut output.
The regional banking crisis and talks of an impending recession aided in bringing the levels down. China, too, helped bring prices down in 2023 by remaining closed 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.
However, nobody was expecting energy prices to do as well as they have in 2024, with the Energy Select Sector SPDR (XLE) rising 10.7% year to date. The sector has been led by oil refiners who have benefited from favorable spreads between the price of oil and its distillates. But it has not been limited to refiners, with explorers and producers, equipment and services also gaining ground. Geopolitical tensions have also played a vital role, with the threat of a broader conflict between Israel and Iran looming charge. This could help propel the prices of crude oil even further.
Since the start of May, crude oil prices have remained relatively low, with tensions easing off, or at least temporarily de-escalating between Iran and Israel. As of May 22, oil prices retreated for the third straight session on demand concerns, with the Fed suggesting that they would keep interest rates higher for longer. However, with the inherent cyclical nature of the sector and based on the miles it has already traveled in 2024, the energy sector is possibly looking at a winning 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.
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. As of April 2024, 54.6% of the fund was invested in the energy sector.
Steve M. Land has been the lead manager of FRNRX since Mar 31, 1999. Three major holdings for the fund are 4.8% in Chevron, 4.6% in ConocoPhillips and 4% in Exxon Mobil.
FRNRX’s 3-year and 5-year annualized returns are 17.8% and 7.7%, respectively. Its net expense ratio is 1.01%. FRNRX has a Zacks Mutual Fund Rank #1. 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. As of April 2024, 49.9% of the fund was invested in the energy sector.
Shinwoo Kim has been the lead manager of PRNEX since May 31, 2021. Three top holdings for the fund are 4.9% in Exxon Mobil, 4.4% in ConocoPhillips and 3.5% in TotalEnergies.
PRNEX’s 3-year and 5-year annualized returns are 8.8% and 7.9%, respectively. Its net expense ratio is 0.75% compared to the category average of 1.04%. PRNEX has a Zacks Mutual Fund Rank #1.
Fidelity Select Energy Portfolio (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. As of April 2024, 89.1% of the fund was invested in the energy sector.
Maurice FitzMaurice has been the lead manager of FSENX since Dec 31, 2019. Three major holdings for the fund are 24.2% in Exxon Mobil, 5.8% in Canadian Natural Resource and 5.2% in Chevron.
FSENX’s 3-year and 5-year annualized returns are 31.4% and 12.7%, respectively. Its net expense ratio is 0.73% compared to the category average of 1.27%. FSENX has a Zacks Mutual Fund Rank #1.
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3 Energy Mutual Funds to Buy on Continued Geopolitical Issues
Crude oil prices touched the ceiling in 2022 on concerns over supply, as Russia invaded Ukraine and the OPEC+ refused to raise production. Global oil inventories started to get depleted, with nations using them up to keep oil and gas prices at a level of sanity. Following an eventual period of slowing down, crude prices hit the $100/barrel level again in April 2023 after a surprise decision by OPEC+ producers to voluntarily cut output.
The regional banking crisis and talks of an impending recession aided in bringing the levels down. China, too, helped bring prices down in 2023 by remaining closed 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.
However, nobody was expecting energy prices to do as well as they have in 2024, with the Energy Select Sector SPDR (XLE) rising 10.7% year to date. The sector has been led by oil refiners who have benefited from favorable spreads between the price of oil and its distillates. But it has not been limited to refiners, with explorers and producers, equipment and services also gaining ground. Geopolitical tensions have also played a vital role, with the threat of a broader conflict between Israel and Iran looming charge. This could help propel the prices of crude oil even further.
Since the start of May, crude oil prices have remained relatively low, with tensions easing off, or at least temporarily de-escalating between Iran and Israel. As of May 22, oil prices retreated for the third straight session on demand concerns, with the Fed suggesting that they would keep interest rates higher for longer. However, with the inherent cyclical nature of the sector and based on the miles it has already traveled in 2024, the energy sector is possibly looking at a winning 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.
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. As of April 2024, 54.6% of the fund was invested in the energy sector.
Steve M. Land has been the lead manager of FRNRX since Mar 31, 1999. Three major holdings for the fund are 4.8% in Chevron, 4.6% in ConocoPhillips and 4% in Exxon Mobil.
FRNRX’s 3-year and 5-year annualized returns are 17.8% and 7.7%, respectively. Its net expense ratio is 1.01%. FRNRX has a Zacks Mutual Fund Rank #1. 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. As of April 2024, 49.9% of the fund was invested in the energy sector.
Shinwoo Kim has been the lead manager of PRNEX since May 31, 2021. Three top holdings for the fund are 4.9% in Exxon Mobil, 4.4% in ConocoPhillips and 3.5% in TotalEnergies.
PRNEX’s 3-year and 5-year annualized returns are 8.8% and 7.9%, respectively. Its net expense ratio is 0.75% compared to the category average of 1.04%. PRNEX has a Zacks Mutual Fund Rank #1.
Fidelity Select Energy Portfolio (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. As of April 2024, 89.1% of the fund was invested in the energy sector.
Maurice FitzMaurice has been the lead manager of FSENX since Dec 31, 2019. Three major holdings for the fund are 24.2% in Exxon Mobil, 5.8% in Canadian Natural Resource and 5.2% in Chevron.
FSENX’s 3-year and 5-year annualized returns are 31.4% and 12.7%, respectively. Its net expense ratio is 0.73% compared to the category average of 1.27%. 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 >>