Liam Gibson
Wealth of Geeks
The 2022 stock market downturn has been painful for most retail investors. Major indices have retreated over the year and have struggled to stage a comeback.
Tech stocks have been particularly hard hit, with the Nasdaq plummeting by about a third . Big-name consumer-facing platforms like Facebook, Amazon, Netflix, and others have seen a tumultuous tumble in their value.
Yet amid rising geopolitical tensions, soaring inflation, ongoing zero-Covid lockdowns in China, and lingering concerns over new virus variants, one industry has been a bright spot in portfolios — energy.
Energy stocks boomed this year in the wake of Russia’s invasion of Ukraine, which has sent demand for commodities such as oil and natural gas skyrocketing.
There are a number of exchange-traded funds (ETFs) designed to increase investors’ exposure to energy companies. Many outperformed the market this year by a substantial margin, but several went above and beyond, tripling and, in some cases, quadrupling investors’ capital.
As of December 1, the following five energy ETFs have delivered year-to-date returns ranging from between 100% and 360%, according to data compiled by VettaFi .
These are leveraged ETFs, which partially explains their outsized returns. Yet this leverage also increases their volatility and potential downside. It is worth noting that several of these ETFs are rebalanced daily, which typically optimizes their performance for sophisticated single-day trades rather than long-term passive investing.
• Direxion Daily S&P Oil & Gas Exp. & Prod. Bull 2X Shares
Any sum invested in Direxion Daily S&P Oil & Gas Exp. & Prod. Bull 2X Shares (GUSH) would have doubled this year. GUSH delivered year-to-date returns of 102%. Launched in 2015, this leveraged fund aims to return 200% on the biggest names in U.S. oil and gas, tracking the S&P Oil & Gas Exploration & Production Select Industry Index. It gives equal weight to its holdings between industry stocks rather than basing its allocation on market cap size. It has an expense ratio of 1.01%.
• ProShares Ultra Oil & Gas
Investors would have struck it big with ProShares Ultra Oil & Gas (DIG) , which achieved an astonishing 143% growth over 2022. Like GUSH, DIG also is doubly leveraged at 200% but tracks the broad-based Dow Jones U.S. Oil & Gas Index, rather than S&P energy index. Its expense ratio is 0.95%.
• Direxion Daily Energy Bull 2X Shares
Investors would have felt bullish after buying Direxion Daily Energy Bull 2X Shares (ERX) , which boasted returns of 146% this year. Like DIG, ERX gives greater allocation to the industry titans. Exxon Mobil and Chevron alone account for around 28% of its holdings. It has an expense ratio of 0.95%.
• MicroSectors U.S. Big Oil Index 3X Leveraged ETN
Investors would have more than tripled their returns with MicroSectors U.S. Big Oil Index 3X Leveraged ETN (NRGU) . This Exchange Traded Note (ETN) has delivered an incredible 257% increase since the beginning of the year. NRGU gives investors a 300% leveraged exposure to the Solactive MicroSectors U.S. Big Oil Index. NRGU selects ten stocks in this index based on which ten stocks have the most liquidity and largest market cap and gives equal weighting to each. It has an expense ratio of 0.95%.
• Credit Suisse S&P MLP Index ETN
Investors looking to quadruple their cash should have picked Credit Suisse S&P MLP Index ETN (MLPO). At the start of December, MLPO was swapping hands at around $41 and has garnered an eye-popping 355% year-to-date return. Issued by Credit Suisse, this ETN tracks the S&P MLP Index. This index targets Master Limited Partnerships (MLPs), a kind of tax-advantaged entity that acts as a hybrid of a partnership and a corporation. According to U.S. law, MLPs have to be involved in either natural resources or real estate, making this kind of index perfect for the energy industry. MLPO picks stocks to track that meet its liquidity and size and is market cap-weighted. Among its top holdings are Enterprise Products Partners, Kinder Morgan Energy Partners, Energy Transfer, Plains All American Pipeline, and Magellan Midstream Partners. It’s expense ratio is 0.95%.
