Penn Wealth Publishing

2018.03.25 Penn Wealth Report Vol 6 Issue 01

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12 Penn Wealth rePort voluMe 6 issue 01 25 Mar 2018 Penn Wealth RePoRt Copyright 2018. All Rights Reserved. investment intelligence Legendary Oilman T. Boone Pickens Inspires a New Fund Admittedly, we love ETFs. Not only do they now cover virtually every nook and cranny of the investment universe, they can even be designed to emulate a certain investment philosophy, or even the process of a spe- cific investor. Take one of the most recent entrants to the market: the NYSE Pickens Oil Response ETF, symbol BOON. The fund's goal is to get inside the mind of T. Boone Pickens, the 89-year- old famed oilman and industry expert. Put another way, Pickens is the fund personified. While his hedge fund may be retired, Pickens' philosophy is thoroughly imbued throughout the fund. Not only will BOON seek out quality companies engaged in the explo- ration and production of energy, it will also invest in companies otherwise tied to the US energy renaissance—including large indus- trial consumers. Here's the thinking behind the fund: when oil prices are rising, upstream, midstream, and downstream oil and gas companies should benefit. But, with the advent of the US energy renaissance, a large array of manufacturing firms and utilities, which rely on cheap fuel for profits, should benefit when costs come down. BOON invests in both the supply and the demand side of the equation, so investors can take part in the sector, but hedge against global price declines. Without looking at any of the 81 hold- ings in the fund, what do you think the top The NYSE Pickens Oil Response ETF is one of the more fascinating new funds we've seen in some time position would be? Maybe an Exxon Mobil (XOM) or a Royal Dutch Shell (RYDBF)? Or what about an Apache (APA) or Halliburton (HAL)? Nope. The largest holding in the fund is the Southern Copper Company—a commodi- ties play! But let's back up just a bit. This is not going to be a "typical" actively managed ETF. In fact, each of the 81 stocks in the NYSE Pickens index is given an equal-weighted 1.2346%, adding up 100%. Holdings are objectively identified from market segments which have a high correlation to changes in the price of ICE Brent Crude. As for the fund's parameters, the base uni- verse consists of the top 1,000 US equities by market cap, with $2 billion being the floor. These stocks are then analyzed for their cor- relation to ICE Brent Crude over select periods of time. Those which fall in the top 4 deciles of each time-frame are selected for membership. A strategic review of the portfolio is com- pleted each December, and equal-weighted adjustments are performed each March, June, and September. This means that Southern Copper won't be the lead holding for long. The Pickens Plan This new ETF was conceived out of The Pickens Plan, announced back in 2008 and touted as "one man's crusade to achieve American energy independence." Few could have fore- seen that crusade achieving its mission within just a decade, especially considering the fact that this has been a stated national goal since the 1972 oil crisis, but it did. While the US still imports energy (due largely to a lack of refinery capacity), we also now export various forms of the commodity. The energy sector employs over 6 million US workers, and that number continues to grow thanks to a resurgence in coal, advancements in natural gas extraction methods, and the nascent renewable resources industry. About six months ago we turned bullish on energy, overweighting the sector. While we own specific companies within the vari- ous Penn platforms, our search for a unique energy ETF as a satellite position within the Penn Dynamic Growth Strategy led us to this new vehicle. We purchased BOON within the DGS on 07 Mar 2018 at $24.93 per unit. Energy Commodities Despite its correlation to the price of crude, BOON is intriguingly diversified among the sectors The content of this report reflects the personal views, opinions, and research of Penn Wealth Publishing. While measures are taken to help assure the accuracy of data, no guarantees can be made and the firm is not liable for any losses incurred by subscribers. This is not a solicitation to buy. Always consult your investment professional before investing any money.

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