Energy Demand Lifts Gazprom, Russia ETF

ETF investors may want to pay attention to the Market Vectors Russia ETF (RSX - commentary - Trade Now). There is a strong chance that a top holding may see a comfortable boost in coming months as economic easing around the globe reignites demand for energy. Year to date for the period ending Nov. 3, the fund has jumped nearly 117%.

Recently I wrote that although the state-owned gas giant Gazprom is hoping to increase its strength in the U.S., current economic factors have required it to focus mainly on its European and Asian branches. While not the company's ideal scenario, its focus on Europe is proving beneficial. Gazprom accounts for nearly 8% of the fund's holdings.

During the worst of the economic crisis, the demand for natural gas in the European Union took a hit. However, as the climate has eased and winter has begun its approach, some of the largest economies in the bloc have begun to invest in large supplies of the fuel once again. The jump has been so significant that Gazprom is now reporting demand exceeding pre-crisis levels.

In response, analysts are starting to reassess their yearly forecasts for the firm. According to The Wall Street Journal, HSBC recently raised its estimates, saying that the company will produce 490 billion cubic meters of gas this year, down only 10% from the previous year.

RSX will be a strong play as long as global energy demand remains high. However, because of its top-heavy sector weighting, this is a concentrated and high-risk bet. Any dip in this industry will affect the entire Russian economy, government finances and the currency, sending the fund and its investors for a loop.

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At the time of publication, Dion had no positions in stocks mentioned.

Don Dion is president and founder of Dion Money Management, a fee-based investment advisory firm to affluent individuals, families and nonprofit organizations, where he is responsible for setting investment policy, creating custom portfolios and overseeing the performance of client accounts. Founded in 1996 and based in Williamstown, Mass., Dion Money Management manages assets for clients in 49 states and 11 countries. Dion is a licensed attorney in Massachusetts and Maine and has more than 25 years' experience working in the financial markets, having founded and run two publicly traded companies before establishing Dion Money Management.

Dion also is publisher of the Fidelity Independent Adviser family of newsletters, which provides to a broad range of investors his commentary on the financial markets, with a specific emphasis on mutual funds and exchange-traded funds. With more than 100,000 subscribers in the U.S. and 29 other countries, Fidelity Independent Adviser publishes six monthly newsletters and three weekly newsletters. Its flagship publication, Fidelity Independent Adviser, has been published monthly for 11 years and reaches 40,000 subscribers.