Energy VIP

07/08/2005 12:00 am EST

Focus:

Doug Fabian

Editor, Successful ETF Investing, ETF Trader's Edge, Weekly ETF Report, and ETFU.com

"We are energizing our VIP portfolio," says Doug Fabian. We note that unlike his Successful Investing service focused on total portfolio planning, his specialized VIP Investor is a higher risk service, making large bets on specific sectors, such as his latest 100% allocation to energy.

" ProFunds Ultra Energy (ENPIX) seeks daily investment results that correspond to 150% of the performance of the Dow Jones US Energy Sector Index. The fund primarily invests in energy companies. Energy has very strong momentum, high year-to-date returns, and prices that have consistently closed above their short-term, intermediate and long-term moving averages. With the year half over, interest rates and oil prices have been the two most influential factors on the market. This constant cloud has kept the average US diversified equity fund down 0.26% for the past six months, while the top five performing ETFs year-to-date are all in the energy and natural resources sector.

"Since the March lows, energy prices have spiraled upward again with global demand for crude and heating oil continuing to exceed supply. With summer here, and lots of families hitting the road for vacation, there's no reason to believe that demand in the US will wane; globally, there's absolutely no question about the needs of countries like China and India. So, while you may pay a pretty penny at the gas pump over the next few months, at least our position in this leveraged energy fund will give us the opportunity to make a prettier penny in our portfolio.

"What will the second half of 2005 bring? Underlying uncertainty surrounding interest rates and oil prices will ultimately keep equities grounded. While we'll likely see continued volatility in the energy sector, one thing is for certain- demand continues to outpace supply and that means higher prices to come in the future. Whether or not rate hikes are halted won't change this basic economic rule. I still believe the energy sector is capable of producing powerful profits in the short term and, in our opinion, ProFunds Ultra Energy is very capable of stepping up to the plate."

Related Articles on