For exposure to energy, Neil George favors Fidelity Select Energy (FSENX), which he says follows a "best of breed" strategy. The editor of Personal Finance newsletter explains, "The fund is up 20% year-to-date, while the average return for its peers is 12.6%. In the mutual fund business, this is a spectacular performance."
And, he adds, Fidelity Select Energy is one of the more conservative funds in the sector. He observes, "The fund shows excellent returns when the sector is hot and smaller declines in times of sector corrections."
George suggests, "This is the best of both worlds when it comes to mutual funds; generally, those that do best on the way up don't do as well on the way down. This shows that manager John Dowd knows how to play defense."
How does he manage to deliver such numbers? asks the advisor. His answer: "By keeping the portfolio concentrated primarily in US oil stocks that are the biggest and most diversified geographically among the world's energy companies."
The portfolio, he observes, has a healthy mix of integrated oil companies; about 20% is in oil service stocks, and it has very small positions in coal and alterative energy.
It biggest holdings are Valero Energy (NYSE: VLO), Schlumberger (NYSE: SLB), ExxonMobil (NYSE: XOM), Chevron (NYSE: CVX) and ConocoPhillips (NYSE: COP). George says, "This list of holdings indicates a tendency to invest in the top players among the smaller industry groups within the energy sector. This can also be described as a 'best of breed' strategy."
Each day, Steven Halpern's TheStockAdvisors.com features the latest stock picks and investment ideas from the nation's leading financial newsletter advisors.
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