Tuesday, June 18, 2013

Fewer Europeans are driving their cars but Middle Eastern tyrants are looking back to the USSR.  The latter appears to be carrying the weight of the oil market and Quant has a feeling the energy sector will keep you satisfied.  Three of today’s top 10 are familiar energy funds that have been scoring and performing well for much of the year.  The 4th place SPDR S&P Oil & Gas Exploration & Production Fund (XOP) has had a volatile 2013 but mostly kept pace with the broad market as has the Vanguard Energy Sector Fund (VDE), tied at 4th place today.  The 8th place iShares Dow Jones U.S. Oil & Gas Exploration & Production Index Fund (IEO) has been more helter skelter but is up almost 18% this year.

All three score better on the Behavioral side with decent short, intermediate and long term technical scores around 70 and even better sentiment scores.  Put call ratios and short interest are elevated and the downtrends over the last four weeks have sustained their implied volatility scores, although with room to rise from their current levels around 70.  The broader VDE has the better Fundamental Score of 69.6 while IEO and XOP score 66.2 and 61.1 as their constituents are fracking here, there and everywhere with consequences to their income statements.  You can’t buy love but all that oil and gas should fix the holes in their balance sheets with all three getting Green Diamond Reward Ratings just above 8.6 while the broader VDE surprisingly has a higher Red Diamond Risk Rating of 5.15.  The ETFGsm Risk Ratings are reflective of a product’s price volatility and structure and IEO and XOP score lower at 4.63 and 4.28.  With risk, lower is better.

Whether you take your magical mystery tour down the long and winding road or in a yellow submarine, you need fossil fuels and probably still will when you’re 64.  Even if you are Mother Nature’s son, you can sing Good Day Sunshine as America’s abundant natural gas is reducing carbon emissions. When it looks as though Middle Eastern troubles are here to stay Quant says these energy funds can make you a rich man.  Thank you for helping us spread the ETF Globalsm message; we get by with a little help from our friends and we wish a happy 71st birthday to Sir Paul McCartney.

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