Trade Tracker: Joe Terranova buys the VanEck Oil Services ETF
Speakers
Joe Terranova
— Senior Managing Director, Virtus Investment Partners
Scott Wapner
— Host, CNBC
Summary
Joe Terranova explains his new personal buy of the VanEck Oil Services ETF and lays out a bullish energy thesis. He argues crude oil positioning is extremely short, so a move above $60 could trigger a short squeeze, and he favors energy because it is under-owned and offers alpha in quality names. He also describes a barbell of Chevron as the safer play and SLB as the higher-beta play.
- Joe Terranova says he bought the VanEck Oil Services ETF personally.
- He cites CTA and Commitment of Traders data showing everyone short crude oil.
- A mild move above $60 crude could create a short squeeze, he says.
- Energy is only about 3% of the S&P 500 and can offer alpha in quality names.
- He owns Baker Hughes through the oil services ETF, plus Valero and EQT.
- He is barbelling energy with Chevron as the safe play and SLB as the beta play.
- The panel also notes SLB's target raise and ExxonMobil's low beta.
- The discussion frames energy as an under-owned sector with tactical upside.
Ideas
Buys oil services ETF at 52-week high.
Joe Terranova made a personal buy in the oil services ETF, which hit a 52-week high. He is bullish oil services as an energy implementation, supported by the crude-oil short-squeeze setup and by the view that energy is under-owned and offers alpha if you find quality names. The ETF also gives him exposure such as Baker Hughes.
Energy underowned; alpha in quality names.
Joe Terranova argues energy is only about 3% of the S&P 500 weighting, so it has been easy to ignore, but that is where real alpha generation is if you find quality names. He says his energy ownership includes Baker Hughes through the ETF, Valero, and EQT, and he wants to be buying energy because of geopolitical risks and the crude short-squeeze setup.
Everyone short crude; squeeze above $60.
Joe Terranova says that when he calls around to people trading energy and non-discretionary/trend-following capital allocated to crude oil, he cannot find anyone long; everyone is short, as reflected in CTA Commitment of Traders reports. Therefore even a mild uptick above $60, with crude already approaching $61, could trigger a short squeeze and support crude oil prices.
Barbell Chevron and SLB energy.
Joe Terranova is barbelling his energy exposure: Chevron is the safe way to play it, while SLB is the beta. He thinks investors should have a double weighting, pairing the lower-risk integrated major with the higher-beta oil services name.
