Energy Mutual Funds Surge Amid Crude Oil Price Hike
Rising tensions in the Middle East have sent crude oil prices soaring, causing fears of an energy crisis and inflation. The Energy Select Sector SPDR (XLE) rose 2.1%, reflecting gains in energy-related stocks.
The surge in crude oil prices affects headline inflation figures, potentially slowing down moderation in inflation and influencing expectations regarding interest rate cuts.
However, the environment for energy companies to benefit from higher crude prices is favorable, making energy mutual funds a good investment choice. These funds hold diversified portfolios of explorers, producers, refiners, and service companies that supply equipment to explore and produce crude oil.
We recommend three energy funds: Vanguard Energy Opportunities Inv (VGENX), Invesco SteelPath Invesco Energy Inv (FSTEX), and T. Rowe Price New Era (PRNEX). These funds have a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy), positive three-year and five-year annualized returns, minimum initial investments within $5000, and expense ratios lower than the category average.
VGENX invests in common stocks of energy-industry companies, including Shell PLC, ExxonMobil Holdings Corp, and TotalEnergies SE. The fund's lead manager, G. Thomas Levering, has been at the helm since January 16, 2020. VGENX's 3-year and 5-year annualized returns are 19.1% and 19.9%, respectively.
FSTEX invests in securities of issuers engaged in energy-related industries and derivatives with similar economic characteristics. The fund's lead manager, Kevin C. Holt, has been at the helm since June 5, 2020. FSTEX's 3-year and 5-year annualized returns are 16.6% and 24.5%, respectively.
PRNEX invests in common stocks of natural resource companies that may benefit from accelerating inflation. The fund's lead manager, Shinwoo Kim, has been at the helm since June 1, 2021. PRNEX's 3-year and 5-year annualized returns are 11.1% and 11.2%, respectively.
The funds' net expense ratios range from 0.45% to 1.22%, which is lower than the category average. These funds have provided a relatively stronger performance and carry lower fees, making them attractive investments for long-term growth.