One Energy That's Going Up

Energy is the worst-performing sector in the S&P 500 this year, but within the struggling group, there are some pleasant surprises. Among energy exchange traded funds, perhaps the most pleasant surprise is the VanEck Vectors Oil Refiners ETF CRAK.

While CRAK's year-to-date gain of 7.2 percent is behind the S&P 500, the refiners ETF is still easily outpacing traditional energy ETFs, most of which are delivering deeply negative performances to this point in the year.

CRAK: Young, But Mighty

CRAK, which debuted in August 2015, holds 26 stocks and is the only ETF on the market dedicated to refiners, the one corner of the energy sector that historically benefits from lower oil prices.

“While the Explorers and Producers have been hammered in the short term regardless if we look at Small, Mid, or Large cap names in the space, one segment of the Energy Equity space that is now represented in ETF form that has held its ground is that of refiners,” said Street One Financial Vice President Paul Weisbruch in a note out Wednesday.

CRAK's top 10 holdings combine for over 61 percent of the ETF's weight. That group includes familiar refining names, such as Phillips 66 PSX, Valero Energy Corporation VLO and Marathon Petroleum Corp MPC.

Methodology/Strategy

“Launched less than two years ago in August of 2015, CRAK (VanEck Vectors Oil Refiners, Expense Ratio 0.59 percent) remains rather small in AUM terms ($4.5 million in AUM,) but has actually shown net positive performance year-to-date in what has shown to be a difficult environment from companies operating in the Oil and Gas space, largely to the continued volatility and pressure in Oil and Gas prices themselves,” said Weisbruch.

CRAK tracks the MVIS Global Oil Refiners Index, “a rules-based, modified capitalization weighted index intended to give investors a means of tracking the overall performance of companies involved in crude oil refining which may include: gasoline, diesel, jet fuel, fuel oil, naphtha, and other petrochemicals,” according to VanEck.

Refiners benefit when oil prices slide due to lower crack spreads, perhaps the inspiration for CRAK's ticker, and that could be a catalyst for further upside for the ETF even if oil prices continue climbing.