Strategiest Max Breier is Bullish on Oil & Gas ETFs

Energy prices are on the rise after Sunni militant fighters started attacking and capturing several cities in Iraq. Oil prices could exceed $150 per barrel if Iraqi production is completely lost. BMO Capital Markets Equity Derivatives Strategist Max Breier was interviewed on Bloomberg Television’s “Market Makers,” where he discussed his options play for the SPDR S&P Oil & Gas Explore & Prod. ETF (NYSEARCA:XOP). Let’s take a look at some of the highlights.

The program started with Mr. Breier explaining why bond investors have reacted so decisively to the inflation data, while equity investors were less alarmed.

“Bonds are reaching what most people think is a ceiling, or a floor, as far as yields go. So, there is not much more room to the downside for yields. There is a natural convexity in the bond market that is not present in equities, just based on where yields are at this point.”

On the opposite, the market is telling us that equities have more room to rise still: volatility is very low in most asset classes, same as the VIX, so “there is a bit of complacency, if you will, but there is no major risk factors to shake thinks up.”

Construction Infrastructure Unemployment Rate Labor Force Participation

As the interview continued, Mr. Breier went over the SPDR S&P Oil & Gas Explore & Prod. (XOP), a fund that seeks to replicate as closely as possible the total return performance of the S&P Oil & Gas Exploration & Production Select Industry Index. The ETF includes E&P companies, mainly mid-cap (and even smaller capitalization) firms. “With everything that is going on, both in Iraq, and growth coming in better than expected out of China (…) there is a lot of reasons to be bullish on crude, and therefore, bullish on the E&P –he explained. So, the trade that we like calls out to September. SPDR S&P Oil & Gas Explore & Prod. is trading around 81, so the 87-92 call spread for about $1 gives you a great payout and a great way to get long the upside in the E&P names.”

Within the energy segment, one stock has been particularly active lately. Williams Companies Inc. (NYSE:WMB)’s stock rose 2.3% today, after surging about 19% yesterday, following the announcement of a proposed merger with Access Midstream Partners LP (NYSE:ACMP). “We are seeing continued call-buying. We saw call-buying before the proposed merger was announced. And this is a somewhat low volume stock; so a 20% move in Williams is actually a very large move for this type of stock. And it’s really a play on the energy infrastructure; as we all know there is a huge supply shift coming online in the U.S., both in terms of natural gas and crude. What’s lacking is the infrastructure to move that energy around,” Mr. Breier said.

Disclosure: Javier Hasse holds no position in any equities, bonds or ETFs mentioned

 

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

10 Best States To Practice Medicine

The 10 Best States to Have a Business

The 12 Most Expensive Apple (AAPL) Apps in the Market

The 10 Richest Billionaires in the World

10 Biggest Kickstarter Failures

The 10 Best Places to Work At

The Top 10 of Google Inc (GOOGL)’s Most Expensive Acquisitions

13 Best Cities to Visit in South America

10 Most Expensive Works of Art of All Time

The 10 Richest Banks in the World

The 10 Best-Paying Jobs in America (2014)

7 Most Expensive Foods in the World

The World’s Top 10 Earning Authors

Five Wicked and Very Expensive Items (and Other “Stuff”) Sold on eBay

10 Biggest Celebrity Bankruptcies

The Top 10 Highest Paid CEOs in 2014

The 10 Most Expensive Real Estate Cities in America

10 Most Expensive States To Live In America

The 10 Best Airlines in the World

The 10 Best-Selling Cars in 2014

The 10 Best Industries to Invest In

The 10 Most Expensive States to Own a Car In

Top 10 Business Schools in US: 2014 Rankings

Top 20 Female Billionaires in 2014

6 Movies That You Should Watch to Better Understand The Cold War

Top 15 Best Paying Jobs for Women in 2014

Top 6 Things Rich People Do Differently Every Day

5 Retirement Mistakes To Avoid (and Einstein’s Famous Quote)

11 Smartest People in the World

6 Films About the Financial World You Need To Watch (While “The Wolf” is Not Around)

Warren Buffett and Billionaires Are Crazy About These 7 Stocks

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top 6 Tax Scams and How to Protect Yourself

Top Businesses to Invest In

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!