February is a month known for Groundhog- , Valentine's- and
Presidents' Day. Aside from these holidaies, February also marks
the start of some important seasonal trends pertaining to the
energy sector. The second month of the year is the first in what
is historically a strong four-month run for energy stocks.
Including data from 2012, the average energy sector's gain in
February is one percent with the group rising in 12 of the
previous 20 Februarys,
according to EquityClock.com
. Bullishness in February gives way to average gains for the
sector of about three percent in March and April.
Through last year, 14 of the previous 20 Marchs and 15 of the
past 20 Aprils saw the energy sector rise, according to
EquityClock data. May gives investors an opportunity to take
profits with an average gain of just 0.7 percent over the past 20
years. With those seasonal trends in mind, here are some of the
investors will want to be have on their screens in the weeks
First Trust ISE-Revere Natural Gas Index Fund (NYSE:
) Somewhat quietly, the First Trust ISE-Revere Natural Gas Index
Fund is off to a banner start in 2013. Even when accounting for
Tuesday's 0.54 percent decline, FCG is higher by about 4.4
percent year-to-date. Notable is the fact that February also
marks the start of favorable season trends for natural
gas-related fare, though that serves as an important factor about
FCG that often goes overlooked.
That fact is that FCG
is about more than natural gas
. Yes, the ETF has "natural gas" in its name. And yes, holdings
such as Chesapeake Energy (NYSE:
) and Range Resources (NYSE:
) mean some level of correlation to natural gas prices.
All that said, FCG is oilier than it appears at first glance.
Some of the companies found in this ETF trying to bolster oil
production over gas: think Chesapeake, Devon Energy (NYSE:
) and some others, but those like EOG Resources (NYSE:
) and Apache (NYSE:
) are oil plays. Arguably, FCG's oil exposure is something the
ETF is not always given credit for.
iShares Dow Jones U.S. Oil & Gas Exploration &
Production Index Fund (NYSE:
) Since IEO was
was highlighted as valid play on energy sector
earnings late last month
, the ETF has jumped four percent. The fund's performance over
the past month is even more impressive, showing an almost 11
IEO is home to 61 stocks, but the rub is that the ETF is not
too diverse as the top-10 holdings represent about 65 percent of
the fund's total weight. The bad news with that scenario is that
if some of IEO's top holdings lag in the coming months, the ETF
will follow suit.
On the other hand, if select IEO constituents keep their
current trend of out-performance going, the ETF could make a run
to $80 in the coming months. Occidental Petroleum (NYSE:
), which accounts for almost 14 percent of IEO's weight, has
sharply outpaced rivals Exxon Mobil (NYSE:
) and Chevron (NYSE:
) this year. Up 9.7 percent year-to-date, Anadarko Petroleum
) has been a leader among large-cap U.S. independent exploration
and production companies.
Likewise, Phillips 66 (NYSE:
) has a been a star among refiners. Anadarko and Phillips combine
for almost 16 percent of IEO's weight.
IndexIQ Global Oil Small Cap ETF (NYSE:
) First, the cautionary tale. Investors that do not like small,
or thinly traded ETFs probably will not like IOIL. To each his
own, but passing over IOIL has meant missing out on returns of
over 15 percent over the past three months.
There are couple of things to note about IOIL before jumping
in. The ETF does live up to its name in that about half its
weight is allocated to non-U.S. companies. That includes a
roughly nine percent allocation to emerging markets. Also, the
ETF features exposure -- albeit slight -- to various foreign
currencies, including the Canadian dollar, Thai baht and Japanese
One point of allure: IOIL does a good job of spreading its
weight between exploration and production firms, oil services
names and refiners. IOIL's 39.2 weight to refiners will reward
investors if that sub-sector of the energy space keeps
For more on ETFs, click
(c) 2013 Benzinga.com. Benzinga does not provide investment
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