This post is written exclusively for Investing.com
What are the markets weighing right now?
Uncertainty
There are many fears that contribute to this heightened level of uncertainty, which is currently holding people back from investing:
A presidential election that for many voters is a Hobson & # 39; s Choice seems.
A virus that kills those who don't take simple precautions. Which in turn leads to …
A global economy that is "currently" limited.
"This too will pass …"
Above all, markets hate uncertainty. As we've seen through numerous presidencies, it doesn't necessarily matter who sits in the White House, as markets adjust once the uncertainty is gone. Our fears are always greater than the reality of the problems we have to solve.
Nevertheless, markets are moved in the very short term by congressional elections, presidential elections, trade wars, threats of trade wars, the low possibility of trade wars, sanctions, threats of sanctions, the low possibility of sanctions and a host of other items that are relatively nonexistent. related to your investment portfolio.
What is important to the markets is uncertainty. Even the devil we know is better than the imaginary demons who create uncertainty among otherwise rational people. The US presidential election will be over in six days. The great fear that it will take weeks to count all votes persists. And yet, 66 million Americans and still have voted, breaking records for early ballots.
I myself will be away from my polling station on election day. My vote will be delivered directly to a duly authorized officer at my local library before then.
Knowing it may take a while to count all votes, and as I understand it is dangerous to wait in line, many more Americans are likely to vote in the next few days rather than waiting for November 3.
I believe the biggest fears that the headlines have been declaring in most of our media outlets – that it will take weeks to determine the winner – have been exaggerated. If I'm wrong, this could slow the next step up in the US and global markets, but not be sidetracked.
Regarding COVID-19, I have a personal friend who is currently enrolled in a Pfizer (NYSE 🙂 study in human trials. The company says it believes it will be able to start offering an approved vaccine for the most at-risk populations by the end of the year. The & # 39; end of the year & # 39; sounds like a long way off, but it's only been nine weeks. Even if the company does run into a problem, there are three other big ethical pharmaceutical pharmaceutical companies not far behind them and scoring more around the world that are willing to contribute.
This uncertainty will therefore soon arise. behind us. That does not mean that we are out of the woods immediately. It does mean it won't take that long for those who can be vaccinated to get on with their lives. Even if it takes longer than we hoped for the economy to fully recover, we are heading in the right direction. And direction is what moves markets.
How to Invest in this Scenario
The FANMAG Stock – Facebook (NASDAQ :), Apple (NASDAQ :), Netflix (NASDAQ :), Microsoft (NASDAQ) :), Amazon (NASDAQ 🙂 and Alphabet (NASDAQ 🙂 – which have been the market leaders for most of this year, aren't bargains. It's easy to believe their momentum must continue. I do not agree. I still want to be invested in tech companies, but I see a wonderful turnaround in industries that are currently out of favor.
and should perform extremely well in an environment where the economy is returning to a more even keel. Example: I looked for another energy company that has the same rebound capabilities as Exxon (NYSE :), which I currently have in my own investment portfolio.
The very first name that trickles down to the top of my search is of course Chevron (NYSE :). But I also wanted to buy one or more of the refineries in America that are just as much or more depressed as the explorers and producers.
By doing that, I think I have found the best possible choice: a relatively unnoticed ETF
The fund is a market capitalization index of the US oil and gas industry. Buying an "all-market" index with the good, the bad, and the ugly doesn't make sense to me. I would rather try to buy the good through the various factor funds out there today.
But in this case – while there may be some ugly babies in this ETF wallet, they are way down the list. in terms of their representation. The entire energy sector has so precipitated that it has entered my favorite buying point: quality stocks that represent value and whose growth has been stunted, but now look at robust growth as the economy recovers.
The ETF is the Fidelity® MSCI Energy Index ETF (NYSE 🙂 co-managed by BlackRock (NYSE 🙂 and FMR (Fidelity.)
Market Capitalizations
I started looking for one or two additions to my Exxon business and instead discovered a viable alternative. Since XOM and CVX are weighted by capitalization, they together make up more than 43% of the total portfolio. Add the three largest refineries and I have more than 50% of the holdings in this fund. In addition, there are five more wrecked companies in the world of E&P, pipelines and equipment, all of which are well below. The 10 most important holdings make up 72% of the portfolio. I know and like them all:
Top 10 Holdings
This deposited ETF is wonderfully representative of the entire American energy sector. XOM is the fund's largest holding, so by replacing my XOM position in the portfolio with FENY, I will still be my favorite & # 39; energy survivor & # 39; and I will also own the others.
The other 82 holdings make up only 28% of the fund, but many are paying such significant dividends – some of which I suspect will diminish if the economic recovery continues – that I didn't make a stock switch just through this transaction , but also increased the dividend payout, in this case double digits. Here are some of the positions with the largest dividends:
XOM
Exxon Mobil Corp
22.46
CVX
Chevron Corp
20.8
COP
ConocoPhillips (NYSE 🙂
5.45
RMI
Kinder Morgan Inc (NYSE 🙂
3.88
WMB
Williams Companies Inc (NYSE 🙂
3.69
PSX
Phillips 66 (NYSE 🙂
3.5
SLB
Schlumberger (NYSE 🙂
3.34
EOG
EOG Resources Inc (NYSE 🙂
3.24
MPC
Marathon Petroleum Corp (NYSE 🙂
2.95
VLO
Valero Energy Corp (NYSE 🙂
2.73
PXD
Pioneer Natural Resources (NYSE 🙂
2.19
OKE
ONEOK Inc (NYSE 🙂
1.77
HES
Hess Corp (NYSE 🙂
1.75
HAL
Halliburton (NYSE 🙂
1.64
LNG
Cheniere Energy (NYSE 🙂
1.62
OXY
Occidental Petroleum Corp (NYSE 🙂
1.39
BKR
Baker Hughes Co, Class A
1.35
CXO
Concho Resources (NYSE 🙂
1.34
COG
Cabot Oil & Gas Corp Class A
1.07
Note how closely this ETF follows its benchmark:
Quarter-End Average Annual Total Return
Also note the expense ratio: less than 0.09%. That's not a decimal substance, but it's close.
Do not participate in this investment if you believe that oil and natural gas companies are in their final death throes. Seriously – a lot of people really believe this.
They point to China, where almost every new car sold is some type of electric vehicle (EV). What they don't realize is that today China is building more coal-fired power plants than any other country, and much of the electricity that powers the batteries of all these EVs is produced by coal.
The image below clearly shows those coal. -fired power plants currently being shut down around the world, which are still in operation, are newly built and are under construction. (For more details, visit the website cited below as a source. You can zoom in on any region of the world …)
Source: https://www.carbonbrief.org/reken19459003]
As the US energy sector recovers, I can imagine that the PRC (People's Republic of China) may find it worthwhile to convert some of the 70% of electricity currently produced by coal to liquefied natural gas (LNG). supplied by the US, Australia and other major natural gas producers, a much cleaner fuel than coal.
The US power industry consists of wind, solar, biomass, geothermal, hydropower, in addition to oil and natural gas – the two Mother Nature who carefully cared for our use as already compressed batteries. I have no doubt that the US energy sector is triumphing in world markets, and I believe that an ultra-low-cost energy fund with the greatest interests as the biggest, and perhaps the best value, is the way to invest now.
Abused, scorned and forgotten however Big Energy may be, these companies represent clear value at these levels. Some patience may be required but I am confident they will be around for a long time and become profitable again. One day we may be able to generate 100% of our electricity, 100% of our transportation, 100% of our production and 100% of our HVAC needs from renewable energy sources.
That day is not now. For the foreseeable future, oil and natural gas will still be the big dogs in all of the above areas. I want to own them now when they are cheap.
