Three Speculative ETFs For $100 Oil
Like it or not, there's a reasonably good chance we'll see $100 oil sometime next year. That's not necessarily bad news because $100 oil could signal the global economy is becoming increasingly vibrant and demand is increasing, which would bolster crude futures along the way.
Coming up with a list of ETF plays on $100 oil isn't all that difficult. The Professor (and plenty of others) have done so several times in the recent past.
That said, there are opportunities beyond those ETFs that focus on the usual oil suspects such as major integrated producers and large oil services firms.
Traders and investors that are willing to take on some risk and delve into a couple of obscure ETFs may find some tidy profits on the back of $100 oil. Here are a few ideas to get started with.
1) Jefferies TR/J CRB Wildcatters ETF (NYSE: WCAT):
Alright, WCAT is highly speculative. As if the title doesn't imply that, the 60-stock ETF has anemic volume of less than 4,000 shares per day and a high expense ratio of 0.65%.
Those are the knocks on WCAT. The bright side is WCAT's lineup focuses on companies that aren't exploring mature fields. Rather, these firms speculate on the POTENTIAL of new, unproven fields, hence the name wildcat. SM Energy (NYSE: SM), Sandridge Energy (NYSE: SD) and Berry Petroleum (NYSE: BRY) dot the top-10 holdings.
2) PowerShares S&P SmallCap Energy Portfolio (Nasdaq: XLES):
The small-cap cousin to the Energy Select Sector SPDR (NYSE: XLE), XLES is another thinly traded name (less than 13,000 shares per day), but small-cap energy exposure could be a nifty way to play $100 oil.
The expense ratio is quite reasonable at 0.29%, but be aware that three stocks, including SM Energy, account for 30% of the funds weight.
3) Global X/InterBolsa FTSE Colombia 20 ETF (NYSE: GXG):
The least speculative member of our list, GXG's 22% allocation to Ecopetrol (NYSE: EC), Colombia's state-run oil producer, makes the ETF a play on $100 oil.
Here's why GXG is speculative in nature, at least when it comes to oil prices: While Ecopetrol has been one of the best performing oil stocks in the world this year, it's technology and exploration reputation is only just starting to come on par with large Western oil majors.
Second, there is always a bit of risk involved with state-run enterprises, especially those from the emerging markets.
Third, Colombia is talking a big game about increased oil production, but whether the country can deliver is another story.
All that said, GXG has the potential to prove to be a solid play on rising oil prices without full oil patch exposure.
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