Tag Archives: author

Oil ETFs To Watch As Crude Slips To Below $40 Again

U.S. crude again trickled to below $40 per barrel on Wednesday following the bearish inventory storage report from EIA that has deepened global supply glut and amid fresh fears that the world’s largest oil producers will not cut production when they meet on Friday. The prospect of interest rates hike and the resultant surge in dollar added to the woes. As such, U.S. crude plunged 4.6% on the day while Brent slumped 4.2% to the nearly seven-year low. The inventory data showed that U.S. crude stockpiles unexpectedly rose by 1.2 million barrels in the week (ending November 27). This marks the tenth consecutive week of increase in crude supplies. Total inventory was 489.4 million barrels, which is near the highest level in at least 80 years. As the Organization of the Petroleum Exporting Countries (OPEC) is due to meet on Friday, the market is not expecting the members to arrest production. Instead they are expected to pump oil vigorously to protect their market share. If this happens, crude will continue to be in a free-fall territory like it was last year when OPEC had decided not to cut production. However, Saudi Arabia and its Persian Gulf allies are willing to cut back if other producers like Iran, Iraq, and Russia join them in the mission. In fact, at the meet, Saudi Arabia may propose a cut of 1 million barrels per day in the OPEC output to strike a balance in the oil markets. Outlook Remains Bleak The current fundamentals are not in favor of oil with rising output and waning demand. This is especially true as OPEC is pumping record oil since Saudi Arabia and other big producers are focusing on market share. Iran is looking to boost its production once the Tehran sanctions are lifted. Meanwhile, oil production in the U.S. has been on the rise and is hovering around its record level. On the other hand, demand for oil across the globe looks tepid given slower growth in most developed and developing economies. In particular, persistent weakness in the world’s biggest consumer of energy – China – will continue to weigh on the demand outlook. Notably, manufacturing activity in China shrunk for the fourth straight month in November to a 3-year low. The International Monetary Fund recently cut its global growth forecast for this year and the next by 0.2% each. This is the fourth cut in 12 months with big reductions in oil-dependent economies, such as Canada, Brazil, Venezuela, Russia and Saudi Arabia. That being said, the International Energy Agency (IEA) expects the global oil supply glut to persist through 2016 as worldwide demand will soften next year to 1.2 million barrels a day after climbing to five-year high of 1.8 million barrels this year. ETFs to Watch Given the bearish fundamentals and the OPEC meeting tomorrow, investors should keep a close eye on oil and the related ETFs. Below we have highlighted some of the popular ones, which could see large movements ahead of the OPEC decision: United States Oil Fund (NYSEARCA: USO ) This is the most popular and liquid ETF in the oil space with AUM of over $2.5 billion and average daily volume of over 25.7 million shares. The fund seeks to match the performance of the spot price of WTI. The ETF has 0.45% in expense ratio and lost 3.6% in the Wednesday trading session. iPath S&P GSCI Crude Oil Index ETN (NYSEARCA: OIL ) This is an ETN option for oil investors and delivers returns through an unleveraged investment in the WTI crude oil futures contract. The product follows the S&P GSCI Crude Oil Total Return Index, a subset of the S&P GSCI Commodity Index. The note has amassed $813.3 million in AUM and trades in solid volume of roughly 3.7 million shares a day. Expense ratio came in at 0.75% and the note was down 3.3% on the day. PowerShares DB Oil Fund (NYSEARCA: DBO ) This product also provides exposure to crude oil through WTI futures contracts and follows the DBIQ Optimum Yield Crude Oil Index Excess Return. The fund sees solid average daily volume of around 311,000 shares and AUM of $477.9 million. It charges an expense ratio of 78 bps and lost 2.9% in Wednesday’s trading session. United States Brent Oil Fund (NYSEARCA: BNO ) This fund provides direct exposure to the spot price of Brent crude oil on a daily basis through future contracts. It has amassed $82.7 million in its asset base and trades in a moderate volume of roughly 109,000 shares a day. The ETF charges 75 bps in annual fees and expenses. BNO lost 3.7% on the day. Original post .

NRG: A Green Done Undone By Coal

CEO David W. Crane resigned and the market cheered. Some may have thought it was a green dream undone. The blame belongs to coal and natural gas, not to solar. The resignation of David Crane as NRG (NYSE: NRG ) CEO sent the stock up, and fossil fuel advocates celebrated the demise of a green energy pioneer. The opposite is the case. Crane was undone by a $1 billion bet made on coal, specifically the Petra Nova “clean coal” project outside Houston, which is also taking down about $167 million in Department of Energy money. Crane had offloaded half of the project to a Japanese company, and a story early this year said the plant was operating normally, but a link to it on the NRG site no longer works. The idea of Petra Nova was to find a market for carbon dioxide. Instead of treating it as a pollutant and releasing it into the atmosphere, Petra Nova captures it and ships it via pipeline for injection into oil and gas wells. The carbon dioxide is meant to displace oil and natural gas in the formations, sequestering it from the atmosphere, but pushing valuable hydrocarbons to the surface. It’s a clever idea, but as oil and gas prices have declined it’s as uneconomic as coal itself. As Crane himself indicated in a recent conference call the rest of the company is running smoothly. Crane predicted the company would generate $3 billion to $3.2 billion in Earnings Before Interest, Taxes, Depreciation and Amortization, and $1 billion to $1.2 billion in free cash flow, during 2016. That would mean the company, whose present market cap is $3.3 billion, is now worth barely more than next year’s EBITDA, and less than three times expected free cash flow. The company isn’t out of the financial woods. There was $20.9 billion in debt supporting $31 billion in assets at the end of September. NRG’s plan is to shrink that balance sheet by $1.4 billion over the 2016 fiscal year, and Crane was confident in his call that the “retail” segment of the business would let it do just that. Investors don’t believe that, in part, because of the continued low price of natural gas but also, in part, because of the holes coal has blown in the balance sheet. The stock is down 63% for the year and, before Crane’s resignation, it showed no signs of recovery. Chief operating officer Mauricio Gutierrez is a Crane protégé and, like him, based in Princeton, NJ. Nothing is expected to change under his leadership. Crane, meanwhile, is now free to seek what might, literally, be greener pastures.

4 Strong-Buy Small-Cap Value Mutual Funds

A small-cap value fund is a good choice for investors seeking diversification across sectors and companies, and focusing on gaining exposure to stocks that are trading at discounts. Investors with a high-risk appetite should invest in these funds. Small-cap funds generally invest in companies having market caps lower than $2 billion. The companies, smaller in size, offer growth potential and their market capitalization may increase subsequently. Meanwhile, value stocks are those that tend to trade at a price lower than their fundamentals (i.e. earnings, book value, debt-equity). It is a common practice to invest in value funds for income or yield. However, not all value funds solely comprise companies that primarily use their earnings to pay dividends. Investors interested in choosing value funds for yield, should be sure to check the mutual fund yield, which is the dividend payout divided by the value of the mutual fund’s shares. Below we share with you 4 top-rated, small-cap value mutual funds. Each has earned a Zacks Mutual Fund Rank #1 (Strong Buy) and we expect the fund to outperform its peers in the future. CornerCap Small Cap Value (MUTF: CSCVX ) seeks capital growth over the long run. CSCVX invests the lion’s share of its assets in small cap companies located in the US. CSCVX defines firms with market capitalization below $3 billion as small cap. The CornerCap Small Cap Value fund returned 9.4% over the past one year. As of September 2015, CSCVX held 221 issues with 0.69% of its assets invested in Fidelity Southern Corp. (NASDAQ: LION ). Perkins Small Cap Value Fund A (MUTF: JDSAX ) invests a large chunk of its assets in common stocks of undervalued small-cap companies. JDSAX invests in securities of companies with market capitalization similar to those listed in the Russell 2000 Value Index. JDSAX may invest a maximum of 20% of its assets in cash or equivalents. The Perkins Small Cap Value A fund returned 5.7% over the past one year. JDSAX has an expense ratio of 1.03% as compared to the category average of 1.23%. Northern Small Cap Value (MUTF: NOSGX ) seeks long-term growth of capital. NOSGX invests a major portion of its assets in equity securities of companies having market capitalization within the universe of the Russell 2000 Value Index. NOSGX may focus on a particular sector including financial services. NOSGX may invest in companies that may not provide any dividend. The Northern Small Cap Value fund returned 5.6% over the past one year. Robert H. Bergson is the fund manager of NOSGX since 2001. Queens Road Small Cap Value (MUTF: QRSVX ) invests generally in securities of small-cap companies located in the U.S. QRSVX seeks to provide capital appreciation by investing the majority of its assets in equity securities of companies. The Queens Road Small Cap Value fund returned 6.3% over the past one year. QRSVX has an expense ratio of 1.24% as compared to the category average of 1.23%. Original Post