This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Five Funds That Tap Energy's Potential

It's high time to give your portfolio an energy boost.

A large contingent of the smart-money set is concluding that the energy sector, after years of neglect, deserves an overweighting in 2004 -- for several reasons. First, energy demand continues to rise while supply remains tight. Second, energy companies' earnings growth has been among the most impressive of all sectors and looks poised to continue in 2004. Third, the energy sector has tightened and (pardon the expression) refined its operations in the painful past two decades after the energy bubble burst, taking the sector from a 40% weighting in the S&P 500 to about 8% today. Last, energy stocks on average are dirt cheap compared with other sectors -- in part because the stocks don't reflect the higher oil prices that the market continues to discount.

"One of the big surprises for 2004 is that oil and natural gas prices are going to average much higher than anyone expects," said Leigh Goehring, co-manager of the Jennison Natural Resources fund.

After lagging frothy tech stocks and the broader market for most of 2003, Wall Street has recently cottoned to energy stocks -- the sector's 13.8% return for December was tops among S&P 500 sectors -- and energy's bull run appears far from extinguished. Individual investors looking to tap the sector's strength have plenty of solid options, including a handful of top-shelf energy and natural resources funds as well as some low-cost exchange-traded funds. Today's column offers five offerings worthy of consideration.

But first, let's briefly examine why the sector looks poised to boom in 2004 and beyond.

Oil Prices: Oil prices have remained above $30 a barrel since before the war in Iraq, and energy watchers are growing increasingly convinced that prices won't slide to the $18 to $25 range anytime soon. The Department of Energy's Energy Information Administration projects average oil prices of $28 to $30 a barrel for 2004. Boston-based energy research firm Cambridge Energy Research Associates expects oil prices in the high-$20s for the year. However, "major oil stocks have not been reflecting $25 oil," said Charles Ober, manager of the T. Rowe Price New Era fund, in his recent outlook.

Jennison's Goehring expects oil prices in 2004 will average over $30 a barrel because OPEC should have the ability to retain pricing power, thanks to a slowdown in the growth of oil supply from non-OPEC nations. The skipper, whose fund has averaged a 22% annual return over the past five years, said 2004 may be the year the gap between the perception and the reality about oil prices closes. If the perception is $18 to $25 a barrel and Goehring is right that the reality will remain around $30 a barrel or higher, "anything energy-related is going to be a superb performer in 2004."
1 of 4

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
BP $33.58 0.00%
LNG $38.88 0.00%
TOT $50.75 0.00%
XOM $88.40 0.00%
AAPL $93.74 0.00%


Chart of I:DJI
DOW 17,773.64 -57.12 -0.32%
S&P 500 2,065.30 -10.51 -0.51%
NASDAQ 4,775.3580 -29.9330 -0.62%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs