What can you buy with $10.49 billion in quarterly profits? Well, Exxon Mobil (XOM) - Get Report bought $7 billion of its own stock, a fresh new high in the Dow Jones Industrial Average and a boatload of oil services.
The world's biggest oil company posted the second largest quarterly profit this week, topped only by itself with $10.71 billion in the fourth quarter of 2005. Even with the slide in oil prices from the August high of $78.75 per barrel to this week's low of $56.56, Exxon averaged a domestic selling price of $62.07 per barrel.
The price of oil has leveled off from its summer highs, but this was a volatile week amid earnings from several major energy firms, OPEC announcements of production cutbacks and Friday's news of naval forces rushing to Saudi Arabia's Ras Tanura oil terminal to head off a terrorist threat.
So how did energy-sector funds do amid all the drama? Pretty well, actually. For the week ending Oct. 26, the energy & natural resource funds we rate advanced an average of 2.15%.
The best of the best this week is the
Oil Service HOLDRS
. This exchange-traded fund jumped nearly 4%. The dearth of 2006 hurricanes helped one of its largest holdings,
, which reported third-quarter 2006 earnings that beat estimates and grew 46.3% over the same quarter last year. In the quarter, the company collected $1.2 billion in sales for services and reconstruction efforts in Iraq.
Halliburton's shares are up more than 10% for the week ended Thursday and are poised to have their best week since July 22, 2005, which followed the release of huge second-quarter 2005 earnings.
Along with Halliburton, funds holding the other major oil services companies, such as
, up 8.5% for the week,
, up 6.2%, and
, up 5.9%, did well.
At the other end of the spectrum, funds focused on alternative-energy plays struggled this week. The fortunes of alternative-energy companies rise and fall with the price of oil. As crude becomes cheaper, companies such as
Ballard Power Systems
are seen as less economically viable.
Both of these companies are holdings of the
PowerShares Wilder Clean Energy
ETF and the
Fidelity Select Environmental Portfolio, two of the worst-performing funds this week in our energy/natural-resource funds universe.
Investors in the
( FSPFX)Fidelity Select Paper/Forest Products Portfolio also found themselves in the wrong corner of the natural-resource market this week. The fund's position in
, a company that grows & harvests timber, was trimmed by 1.3%. Another large holding,
( SSCC), gave back 5.2% over the same period when the company predicted a weaker fourth quarter due to seasonally higher energy costs and mill maintenance.
While not as volatile as the technology sector highlighted in
last week's column, the energy sector has been riding the rollercoaster of volatility that drives down risk-adjusted returns. As a result, only two funds in our worst-performer table and two from our best-performer table earned ratings of B- or higher.
Kevin Baker became the senior financial analyst for TSC Ratings upon the August 2006 acquisition of Weiss Ratings by TheStreet.com, covering mutual funds. He joined the Weiss Group in 1997 as a banking and brokerage analyst. In 1999, he created the Weiss Group's first ratings to gauge the level of risk in U.S. equities. Baker received a B.S. degree in management from Rensselaer Polytechnic Institute and an M.B.A. with a finance specialization from Nova Southeastern University.