It doesn’t surprise me that we’ve seen market prices pull back lately. Even though earnings estimates for the S&P 500 Index (^SPX) are rising, most sectors look pricey as heck. But there is one investment that looks very attractive, and it could make you Texas-sized money! I’m talking about the iShares Global Energy ETF (IXC), advises Sean Brodrick, editor at Weiss Ratings Daily.
That might surprise you because energy is the sector everyone loves to hate. And that’s because energy stocks haven’t gone anywhere in three years. I believe that’s about to change in a big way.
One reason would be sheer value. Energy has the second-lowest forward price-to-earnings ratio among the S&P 500 sectors, and the best dividend yield. In fact, its dividend yield is FOUR TIMES that of the S&P 500, which recently stood at 1.17%.
What’s more, large integrated energy companies are generating record free cash flow due to disciplined capital spending, high operational leverage, and resilient oil and gas prices. This has enabled aggressive dividend growth, buyback programs, and enhanced returns to shareholders. These factors historically support further upside in stock prices.
This gets really interesting because forces are lining up to push oil prices higher. Oil prices are near the bottom of the range they’ve traded in all year. I don’t believe they will stay this low.
The best way is to buy individual oil companies that are growing supply while keeping a lid on costs and paying fat dividends. But if you want just to buy an ETF, you can pick up something like IXC. It gets a “C+” from Weiss Ratings, has a dividend yield of 3.7%, an expense ratio of just 0.4%, and is stuffed with big global oil companies.
You can see the IXC broke out through overhead resistance and seems to be zigzagging higher. It should go to at least $61, and maybe higher. You can already find value in oil companies. Now you can target them for profitable investments, too.
Recommended Action: Buy IXC.
