iShares Global Energy ETF

IXC

Market cap $1.82B

I reiterate a "Buy" rating on IXC, citing attractive valuation, global diversification, and a high dividend yield versus the S&P 500. IXC offers exposure to global energy leaders, trades at a modest 14.5x P/E, and boasts a robust 10.2% long-term EPS growth rate. Despite recent underperformance and mixed technicals, IXC's defensive portfolio and favorable calendar trends support a positive outlook.

IXC is a passively managed global energy sector ETF, which I evaluate for its current investment appeal. My previous cautious outlook on IXC has been validated, as the fund has notably underperformed the broader equity market. I see a contrarian opportunity in this fund as expectations are low and crude oil prices are depressed enough that I think the next move will be higher.

I see value in the Energy sector due to its recent underperformance, expected demand rise, and potential trade clarity boosting crude oil prices. Crude oil demand is set to increase, making the current sell-off an opportunity to buy into undervalued Energy ETFs like VDE and IXC. The US's reliance on international trade and a weakening USD could further support crude oil prices, benefiting the Energy sector.

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iShares Global Energy ETF warrants a hold rating, due to a marginal growth outlook and high expense ratio, despite stable dividends. IXC offers a 4.17% dividend yield, but underperforms the market with a 10-year average annual share price return of 5.90%. Key holdings like Exxon Mobil and Chevron provide stable income, but Shell's declining growth impacts overall performance.

IXC is a buy due to its low P/E, high cash flow, and emerging price momentum despite falling oil prices. The ETF has a diversified global portfolio, with significant exposure to large-cap value stocks, particularly Exxon Mobil and Chevron. IXC's technicals show a bullish rounded bottom pattern, with shares above key moving averages and positive RSI momentum.

These ETFs have compelling yields and should continue rising or falling to the tune of oil prices.

iShares Global Energy ETF invests in energy companies within the S&P Global 1200, with capped weight restrictions to prevent dominance. IXC recently had assets under management of $2.15 billion, following somewhat volatile net fund flows, and an expense ratio of 0.41%. The fund's valuation indicates a potential IRR of 12%. However, uncertainty characterized by higher beta is likely to continue to produce volatility.

OPEC+ has provided some baseline aspirations for phasing out their supply cuts, with some elements of the timeline disappointing oil markets. They are principally concerned with the fact that rival capacity has been allowed to grow, and some members in particular have been aggressive about increasing production. We think that due to the budgets of some of these companies, and less urgency over clearing assets, OPEC+ are not that firm on the cuts.

Oil and gas stocks are off to a solid start in 2024 and these energy ETFs can give investors exposure to the space.