"ProShares Ultra Oil and Gas (NYSE: DIG), my top idea for 2009, is an exchange-traded fund that positions itself with the performance of the United States' top oil and gas companies," says Paul Tracy.
In his StreetAuthority Market Advisor, he explains, "The 'ultra' part of its name" means that the fund uses leverage, which magnifies returns by a factor of two relative to the Dow Jones U.S. Oil & Gas Index." Here's his review.
"DIG is a leveraged ETF. In short, for every 1% the U.S. Oil & Gas Index rises, DIG should rise 2%. That means the performance of DIG is dictated by the moves of the largest industry heavyweights like ExxonMobil, ConocoPhillips and Chevron.
"In addition to integrated oil companies, DIG is also exposed to major oilfield service companies like Schlumberger and Halliburton and gas-industry leaders like Apache.
"The world simply cannot, in its current form, live without fossil fuels. Global demand for petroleum is roughly 85 million barrels of oil a day, which means the activity in the oilfields simply never stops.
"That's true in the deserts of Saudi Arabia, in West Texas, in Prudhoe Bay and deep offshore on tiny drilling platforms in the Gulf of Mexico and elsewhere. This constant and steady demand will continue to benefit companies involved in the energy industry and ensure it is one of the most cash-flow positive sectors in the world.
"Though oil prices (and many oil companies) have fallen precipitously since summer, the long-term picture for crude has never been more bullish.
"Continued energy demand from around the world, coupled with economic recovery, will put a floor under oil, and I believe lead to strong gains for the commodity in 2009.
"Consider that in the United States there is roughly one car for every person of driving age. But in China there are fewer than three automobiles for every 100 people, and that figure is even lower in India.
"The emergence of a middle class and population growth in nations like China and India could bring the total number of cars on the road today from its current 700 million to three billion. That demand will no doubt be a strong catalyst for the oil giants, and DIG should be a direct beneficiary."
