Thursday, January 10, 2013

It was on this day in 1901 that mining engineer Anthony Lucas was exploring for oil on a tract of land he leased in Beaumont TX and produced the world’s first gusher.  It was that gusher that is said to have signaled the advent of the American oil industry, an industry that is scoring well in Quant today.

If ETFs had been around back then, we may have seen Lucas’ company in the SPDR S&P Oil & Gas Exploration & Production Fund (XOP) which ranks in 2nd place today.  It has 72 constituents closely weighted with the top position comprising 1.62% of the fund.  No wildcatters and con men among them though, these companies have enough earnings and cash flow to garner a decent 73 Fundamental Score.  Poor trading yesterday dinged the fund’s Technical Score down to 56.6 from the low 60s in the prior few days but that has brought out the bears boosting the contrarian Sentiment Score all the way up to 90.9.

Quant’s 5th place Powershares Dynamic Energy Fund (PXI) has about a quarter of its assets in the E&P space with the rest of its 60 holdings closely weighted among downstream energy positions like services and marketing.  It’s focusing on those new American Jed Clampetts who instead of using their land for shooting food are finding bubbling crude buried deep in the shale formations.  It has an even better 87.2 Fundamental Score but these dynamic funds differ from typical ETFs in that the constituents periodically change; so that score could reflect the sponsor’s model skewing towards lower price issues as much or more than the issues within trading at historically attractive valuations.  That said, the dynamic funds that have scored well in Quant have not disappointed.  This one hasn't disappointed too many holders in recent days, it has been trading well enough to garner a high octane 68.7 Technical Score which has yet to pique the interest of the bears, its Sentiment Score is only 57.2.

Other energy funds are also appearing in the upper ranks recently as are many US basic materials issues.  Ironically, industrial and broad macro funds whose constituents rely on those basic materials are also scoring well.  Is it an inflation signal or an accelerating growth signal?  We report, you decide but Quant says to put some energy in your equity allocation tank.  Our tanks are running low as this first long week in a while winds down, thanks for reading and we’ll be back tomorrow to close it out.

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