As we get into 2012 with the continuing financial crisis over our heads, we continue to look for ideas that we can use to build the best long-term portfolio possible. I believe that Energy is a vital component to a commodities asset class and commodities are going to be important as inflation is going to be an unpleasant reality for some time to come.
Dan Dzombak outlines the Motley Fool's 2012 energy selections. We are going to build a portfolio from its selection and compare it with our benchmark dividend bearing ETF portfolio
Its top energy stocks are:
- Peabody Energy (BTU) Coal
- Kinder Morgan (NYSE:KMI) Oil and Gas
- SunPower (NASDAQ:SPWR) Solar
- Schlumberger (NYSE:SLB) Oil Field Services
- Ultra Petroleum (UPL) Natural Gas
This may not be attractive today but is worth tracking to see whether there is a point that this may be useful.
|Asset||Fund in this portfolio|
|REAL ESTATE||(NYSEARCA:ICF) iShares Cohen & Steers Realty Majors|
|FIXED INCOME||(NYSEARCA:TIP) iShares Barclays TIPS Bond|
|Emerging Market||(NYSEARCA:VWO) Vanguard Emerging Markets Stock ETF|
|US EQUITY||(NYSEARCA:DVY) iShares Dow Jones Select Dividend Index|
|US EQUITY||(NYSEARCA:VIG) Vanguard Dividend Appreciation ETF|
|INTERNATIONAL EQUITY||(NYSEARCA:IDV) iShares Dow Jones Intl Select Div Idx|
|High Yield Bond||(NYSEARCA:HYG) iShares iBoxx $ High Yield Corporate Bd|
|INTERNATIONAL BONDS||(NYSEARCA:EMB) iShares JPMorgan USD Emerg Markets Bond|
- The Fool`s Top 5 Energy Stocks for 2012 -- Total of $10K invested equally in each stock
- Retirement Income ETFs Tactical Asset Allocation Moderate -- Above funds using TAA (40% fixed income, 30% for each of the top two asset classes)
- Retirement Income ETFs Strategic Asset Allocation Moderate -- Above funds using SAA (40% fixed income, 12% for each of the five asset classes -- funds selected based on price momentum)
Portfolio Performance Comparison
|Portfolio/Fund Name||1Yr AR||1Yr Sharpe||3Yr AR||3Yr Sharpe||5Yr AR||5Yr Sharpe|
|Retirement Income ETFs Tactical Asset Allocation Moderate||1%||9%||9%||72%||8%||55%|
|Retirement Income ETFs Strategic Asset Allocation Moderate||1%||6%||16%||98%||2%||7%|
|The Fool`s Top 5 Energy Stocks for 2012|
The table gives us nothing as the selection has been around since February 2011. However, it should be an interesting metric going forward.
|Fund in this portfolio||Percentage|
Peabody Energy Coal
Kinder Morgan Oil and Gas
Schlumberger Oil Field Services
Ultra Petroleum Natural Gas
We note that in the 11 months of its existence, oil and gas and their associated services are leading the way followed by natural gas and solar. It will be interesting to see how the selection moves as we get deeper into the year.
Three Month Chart One Year Chart Three Year Chart Five Year Chart
As we look at the short history, it is not a pretty sight. Energy stocks have been under pressure as part of the commodities sector that has seen drops of late. However, this might be a useful set to keep around and to continue to track as commodities come back into favor.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Additional disclosure: MyPlanIQ does not have any business relationship with the company or companies mentioned in this article. It does not set up their retirement plans. The performance data of portfolios mentioned above are obtained through historical simulation and are hypothetical.