This 'Frack Attack' Portfolio, Down 50% Over The Past Year, Could Prove To Be A Great Investment Option

Energy, energy-related, chemicals and proppants stocks are down big this year. In this context, shares from companies that provide products and services related to fracking are trading at very attractive valuations. Below is a brief look at an equity portfolio that provides exposure to these stocks, which could provide plenty of upside.

A New Energy Source

Hydraulic fracturing, best known as fracking, allows companies to extract “previously inaccessible oil and natural gas from shale rock formations deep within the earth – all at a relatively low cost,” Motif Investing explains. This technology has managed to revitalize the natural gas industry, driving production up and prices down – even though environmental concerns are mounting.

Related Link: Re-Fracking: A Bright Spot For The Energy Sector?

According to an article published in The Economist, natural gas could supply 25 percent of the energy demand in the United States by 2035. While still in its early stages overseas, the people at Motif Investing noted that “fracking has the potential to be a global phenomenon. China, the world’s second largest energy consumer, has large shale gas reserves and is now moving quickly to deploy fracking to access them.”

Frack Attack

Motif Investing constantly looks for “trends, ideas and world events that could create an investment opportunity,” and then picks 10 to 30 related stocks to build portfolios around, weighing them based on their exposure to the coinciding idea, event or trend.

The Frack Attack motif invests in companies that provide fracking technologies and services to oil and gas developers. The portfolio comprises 25 stocks and allocates most of its assets (48.7 percent) to fracking services and equipment stocks. The remaining assets are put in fluid logistics companies (25.6 percent), contract drilling stocks (18.4 percent) and chemicals and proppants businesses (7.4 percent).

Source: Motif Investing

It should be noted that this portfolio has widely underperformed the S&P 500 over the past year, having plummeted more than 50 percent. So, with stocks trading so low, an attractive entry point might be open for those betting on a recovery.

Allocation

Finally, let’s take a look at the top stocks in the motif in terms of allocation:

• 20.6 percent: National-Oilwell Varco, Inc. NOV
• 20.4 percent: Halliburton Company HAL
• 14.3 percent: Helmerich & Payne, Inc. HP
• 11.6 percent: Kirby Corporation KEX
• 7.0 percent: Clean Harbors Inc CLH
• 5.5 percent: Newpark Resources Inc NR
• 3.3 percent: Fairmount Santrol Holdings Inc FMSA
• 1.7 percent: Flotek Industries Inc FTK
• 1.5 percent: TETRA Technologies, Inc. TTI
• 1.3 percent: Cameron International Corporation CAM

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