View Full Version : Too late to buy energy ETFs?

07-05-2005, 05:27 PM

I'm building an ETF portfolio which is about 60% stock (US and foreign), 20% REIT, 10% Bonds, 10% Material ETF (IYM). I'm 29, and the money is in there for the long term (5+ years min).

For this month I was thinking of adding IYE (energy/oil ETF, largest holdings are XOM and CVX).

Am I too late to join the bandwagon?

07-05-2005, 08:19 PM
With the history on this particular ETF, it's currently trading over its 52-week high, and looking at performance, you're buying it over it's resistance level (the level at which a stock stops increasing). With a chart pattern like this, I'd tend to think it's overvalued and due for a correction. All of the energy ETF's are behaving this way currently, so if you MUST add an energy ETF to your portfolio NOW, and you're going to have to buy overvalued securities, look at XLU, where your dollars will go further...

All of the Energy ETF's (XLE, VDE, IXC, IGE, IYE) are charting the same, so get some bang for your buck out of the less expensive shares.


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07-05-2005, 08:55 PM
Am I too late to join the bandwagon?

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Dan Mezick
07-05-2005, 10:20 PM
Am I too late to join the bandwagon?

[/ QUOTE ]

Not according to today's price action.

I see IYE is in a raging uptrend and recently made a new all-time high in mid-June.

07-05-2005, 11:23 PM
Dollar cost averaging into investments that you are going to hold for years is a reasonable way to avoid the anxiety from any short term price corrections. fwiw

07-06-2005, 12:18 AM
Energy ETFs tend to focus entirely on oil and gas, and it's always worth thinking twice if you're buying anything at an all-time high (although in terms of real dollars oil is not at an alltime high).

Despite Goldman Sachs' recent prediction of $100/bb by end of year, there some indications that oil won't go a lot higher.


An interesting contrarian take on supply.


07-06-2005, 02:32 AM
For what it's worth, most stock analysts are still using forward projections of $40/barrel or less for their earnings estimates and valuations. With oil prices hovering significantly above $40, their future earnings look much more attractive than current estimates seem to indicate. My personal belief is that the days of $40 oil are behind us.

And even with $40 oil, many of these oil companies are still valued at less than 10X cashflow. Very few other sectors offer this kind of valuation.

07-06-2005, 03:36 AM
Don't forget OIH. That is doing great too.

I think laserboy has it right. If $50 oil becomes the accepted norm, many oil related companies are actually undervalued.

07-06-2005, 04:59 PM
This is just my opinion, fwiw:

Energy can't go anywhere but up. I don't know how fast or how soon--but you can't expect it to do anything else. With China and India becoming more 'western' it's just a matter of time.

Good advice about dollar cost averaging.

07-06-2005, 06:16 PM
First, 5 years isn't long term.

Second, I would increase your bond allocation.