ETF Expert

There are times when the talking heads in the financial media are myopic. Naturally, everyone wants to know if tech bellwethers like IBM, Yahoo, TI and Apple will beat top-line revenue estimates. Undoubtedly, Goldman Sachs and BP are headline-grabbers due to the recent SEC settlement and the never-ending “spill.”

Yet, I’m startled by the fact that you couldn’t find a decent feature on Halliburton’s earnings triumph. This is one of the world’s leading service providers to the energy industry… from development to drilling to production. How did the ultra-profitable quarter go largely unnoticed?

More specifically, big HAL posted earnings of 52 cents per share, pummeling the average estimate of 30 analysts with a 40% upside surprise. Shares did jump nearly 4% on 7/20/2010, so investors were tuned in… even if the media were absent.

Let’s review Halliburton’s fortunes and misfortunes in 2010. As crude oil reached $85 per barrel in late April, and as Halliburton served up a mixed Q1 earnings report, HAL shares traded near $35. By the end of  May, with oil down more than 20% and a proposed drilling moratorium, HAL had fallen an astonishing 40% to $21 per share!

Since then, Halliburton bulls have pushed the stock’s price from 52-week lows back into a long-term technical uptrend. With oil back to $76 per barrel, Halliburton shares have recovered to $30… a 40% gain off the bottom. It’s not quite a round trip, but a wild ride nonetheless!

For the most part, ETF investors are not cut out for the volatility of individual securities. Most want the diversification of mutual funds and a measure of protection against massive rock slides.

Of course, in today’s trading environment, ETF investors should use their power to reduce risk via stop-limit sell orders. Trade-ability is one of the big distinctions between ETFs and traditional mutual funds.

Volatility aside, Oil Services ETFs may be a means to staying with Halliburton’s current fortunes. Here’s a table for assessing the progress of Oil Services ETFs since HAL bottomed out:

I am not recommending Oil Services ETFs at the present moment. I prefer to get my energy fix from the pipeline partnerships. With that said, I do expect the trend to turn positive if the political uncertainty around the energy sector dissipates… say… in November?!

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