CONTINUED
Even though the long-term uptrend of crude oil remains intact after last month’s bullish trading above $68 per barrel, the easing of supply concerns and geopolitical tensions has brought the price of oil and the energy stocks back from their latest surge upward. This is just one of many corrections since this secular upturn for energy began back in 2000. Although this particular retreat has been swift and rather severe, at least as measured by the exploration-and-production component of the sector, it represents the 15th such pullback of 9 percent or more according to UBS Investment Research. This correction is tied to the warm weather that raised inventories, as well as the January fund-inflows that pushed stocks higher than the increases in the underlying oil and gas commodities justified.
To subscribe visit: http://store.fidelityindependentadviser.com/etf1yr.html
The Dow Jones Transportation Average hit a new high yesterday, rising 2.60 percent, and IYT, the iShares Dow Transportation Index Fund gained 2.52 percent as a result. This fund has appreciated 4.28 percent since last week, making it the best performer within our rankings and helping the fund jump from number ten to number four. Therefore, we will add this fund to the ETF Momentum Portfolio. Much of the fund’s recent performance is tied to its railroad holdings that reported a string of highly impressive results in late January. Number-six position Norfolk Southern reported a 37 percent increase in net income for 2005, and number-five holding Burlington Northern Santa Fe announced 24 percent profit gains for the same period. That kind of news helped send shares of each firm up by more than 10 percent in January.
Analysts explain those numbers by pointing to railroads’ resurgent pricing power. The industry raised prices by up to 10 percent in 2005, the largest boost since the industry was deregulated more than 25 years ago. Of course, such rate hikes only stick if the supply and demand situation allows them to—and during 2005 it did. Higher prices for oil and natural gas led many utilities and other large fuel users to boost their purchases of coal, a material that railroads are uniquely qualified to ship. Meanwhile, rail capacity remained low.
To receive a free issue of the ETF Momentum Tracker simply click http://www.fidelity-adviser.com/etfoffer/freeissue.jsp. There is no obligation and you can see the results for yourself!
