How To Get Positive Returns From Oil And Gas Stocks
Motif Investing explores “trends, ideas and world events that could create an investment opportunity,” and then selects 10 to 30 stocks related to a particular idea to build portfolios based on their exposure to it.
The last year has been hard on oil and gas stocks and, thus, finding a portfolio with positive returns is a difficult thing to do. However, there are still ways to invest in the traditional energy sector and get some money out of it; the portfolio featured below is constituted by companies that use natural gas as a raw material or power source.
Natural Gas Glut
The people behind this motif explain that expectations point towards the North American shale drilling revolution keeping natural gas prices near historical lows for the next decade. “Hydraulic fracking has provided access to large domestic shale gas reserves, leading to an unprecedented increase in natural gas supply. At the same time, demand for conventional uses of natural gas, such as heating, has not kept pace. The result is a supply glut and low prices that may persist for the foreseeable future,” they expound.
However, there’s a way to reap a profit from this trend. Cheap natural gas can help companies that use it as a raw material, like plastic resins and nitrogen-based fertilizers producers, and refiners, which use natural gas as their main source of power.
Below is a chart comparing this motif’s one-year return (in blue) versus the S&P 500 (in green).
While the natural gas portfolio surged 8 percent over the past year, the S&P 500 rose 8.54 percent. However, one thing should be noted: volatility here is moderate.
This motif allocates 46.8 percent of its assets to chemicals producers, 28.1 percent to refiners, 16.5 percent to industrial gases producers and 8.6 percent to fertilizers makers.
The top stocks by allocation include:
- Air Products & Chemicals, Inc. (NYSE: APD): 16.5 percent
- Dow Chemical Co (NYSE: DOW): 11.6 percent
- E I Du Pont De Nemours And Co (NYSE: DD): 11.0 percent
- LyondellBasell Industries NV (NYSE: LYB): 9.0 percent
- Phillips 66 (NYSE: PSX): 7.1 percent
- Valero Energy Corporation (NYSE: VLO): 6.8 percent
- NewMarket Corporation (NYSE: NEU): 6.3 percent
- CF Industries Holdings, Inc. (NYSE: CF): 5.5 percent
- Marathon Petroleum Corp (NYSE: MPC): 5.2 percent
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