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Ratings: Energy & Natural Resource Funds

Kevin Baker

03/24/07 - 10:20 AM EDT

Former Vice President Al Gore testified before Congress this week about global warming. At the same time, energy markets around the world were heating up.

Human beings may be causing the Earth to warm, but the inconvenient truth is that we are also causing the run-up in energy prices.

With gasoline stockpiles declining and the summer driving season around the corner, refineries must boost production of gasoline to meet demand. The Energy Department announced that refinery utilization is at a five-week high. This absorbs the crude oil supply.

Another factor stoking the flames of the energy and natural resource funds is the outlook for interest rates. The Federal Reserve this week eliminated the bias toward higher interest rates, sparking a broad stock market rally.

For energy stocks, the theory is that if interest rates can come down, the economy expands, and more energy will be demanded.

The ( ENPIX Quote)ProFunds Oil & Gas UltraSector ProFund (ENPIX) bubbled to the top of our best-performing list with a total return of 7.66% from Thursday, March 15, to Thursday, March 22.

Exxon Mobil (XOM Quote), Chevron (CVX Quote), ConocoPhillips (COP Quote), and Schlumberger (SLB Quote) are the fund's largest holdings.

But the stocks with the highest percentage gains include Todco (THE Quote), up 24.2%, and Pride International (PDE Quote), up 10.6%. Todco, being acquired by Hercules (HERO Quote), may clear away one of Pride's competitors for Gulf of Mexico contract drilling.

The only losing position for ENPIX was Halliburton (HAL Quote), down 4.3%, on lower expectations of first-quarter profits and declining exposure to North American oil and gas production.

On Tuesday, March 20, Gastar Exploration (YGA Quote) was one of 16 energy companies with market caps below $1 billion presenting at the Johnson Rice Emerging Growth Energy Conference in New York City.

The audience must have liked what they heard, since the stock soared 26.3% for the period under review. Gastar helped the Fidelity Select Natural Gas Portfolio to a return of 6.02%.

If you need immediate gratification and can't wait until the end of the day to make your energy trade, check out the PowerShares Dynamic Energy Exploration & Production Portfolio (PXE Quote). This ETF rose 5.98% on outsized returns of 16.2% from Alon USA Energy (ALJ Quote), 11.1% from Western Refining (WNR Quote) and 10.5% from Rosetta Resources (ROSE Quote).

Best-Performing Energy and Natural Resource Funds
Fund Ticker Rating 1-Week Total Return Fund Type
ProFunds Oil & Gas UltraSector ProFund ENPIX C 7.66% Open-End
Fidelity Select Natural Gas Portfolio FSNGX C 6.02% Open-End
PowerShares Dynamic Energy, Expl & Prod PXE E+ 5.98% ETF
ICON Energy Fund ICENX C 5.92% Open-End
Allianz RCM Global Resources Fund RGLIX U 5.78% Open-End
PowerShares Dynamic Oil & Gas Services PXJ E- 5.76% ETF
Fidelity Select Energy Portfolio FSENX B 5.70% Open-End
Fidelity Advisor Energy Fund FAGNX C 5.69% Open-End
Rydex Series - Energy Services Fund RYVIX C 5.62% Open-End
BlackRock Natural Resources Trust MAGRX B- 5.43% Open-End
Source: Bloomberg 3/15/07 to 3/22/07

The table below is one of the best worst-performing lists possible. With ProFunds covering both the long and short side of the oil and gas group, there is bound to be at least one oil and gas fund falling each week.

Worst-Performing Energy and Natural Resource Funds
Fund Ticker Rating 1 Week Total Return Fund Type
ProFunds Short Oil & Gas ProFund SNPIX U -4.83% Open-End
ING Risk Managed Natural Resources Fund IRR U -0.21% Closed-End
Energy Income and Growth Fund FEN A 0.11% Closed-End
Kayne Anderson Energy Total Return Fund KYE C+ 0.27% Closed-End
Kayne Anderson MLP Investment Co KYN A- 1.24% Closed-End
Tortoise Energy Capital Corp TYY A 1.57% Closed-End
Fidelity Select Paper & Forest Products FSPFX D 1.74% Open-End
BlackRock Real Asset Equity Trust BCF U 1.91% Closed-End
Tortoise Energy Infrastructure Corp TYG B+ 2.39% Closed-End
Van Kampen Utility Fund VKUAX A+ 3.40% Open-End
Source: Bloomberg 3/15/07 to 3/22/07

On Friday, March 23, Iran captured 15 members of the British Navy and their two boats in Iraqi waters. In the best-case scenario, the sailors get released, and the incident stiffens the resolve of the U.N. Security council to apply sanctions against Iran for its defiance of two U.N. resolutions to stop uranium enrichment. Real sanctions may induce Iran to restrict the oil supply sending prices higher.

In the worst-case scenario, Iran's hostage taking escalates into yet another Mideast military conflict for America and its allies, blocking virtually all crude oil shipments out of the Persian Gulf. The price of a barrel of oil is predicted to easily surpass $100 or more if the worst happens.

At those prices, alternative energy sources, such as solar power, become economically viable. Either way, funds holding domestic or non-Persian Gulf energy companies may continue to do well in this environment.

Brokerage Partners