Conoco Holdings Could Offer a Boost to Some Mutual Funds (XOM, CVX, COP, PNEAX, FSENX, FISEX, AMADX)

Since the beginning of the year, returns for the three largest US oil companies have been sturdy, if not blinding, and each has a lower than average P/E ratio. Exxon Mobil Corp. (NYSE: XOM) has posted a year-to-date return of 13.40% and carries a trailing P/E ratio of 11.67. Chevron Corp. (NYSE: CVX) posts the best return so far, of 15.72%, and P/E ratio of 10.10. ConocoPhillips Corp. (NYSE: COP) is virtually equal with Exxon in return, at 13.36%, but its P/E ratio is just 9.12.

Of the three oil majors, Conoco is also the furthest off its 52-week high, at -7.24%. As crude prices begin rising again, Conoco could offer a better value return than the other majors. We’ve taken a look at four mutual funds to see how they stack up on Conoco holdings and potential: Franklin Equity Income A (FISEX), Fidelity Select Energy (FSENX), Allianz NFJ Dividend Value A (PNEAX), and American Century Income & Growth A (AMADX).

The Franklin Equity Income A (FISEX) is a large-cap value fund with total assets of $1.3 billion. The fund holds 66 stocks, of which about 12% are energy stocks. Chevron is the fund’s third largest holding, while Exxon and Conoco each represent 1.87% of the funds assets. Year-to-date the fund has returned 5.79% and it holds a 3-star rating from Morningstar.

The Fidelity Select Energy (FSENX) holds total assets of $2.7 billion. It is a large blended fund that holds 74 stocks in traditional and alternative energy companies. Its top two holdings are Exxon and Chevron, and Conoco is not among its top 25 holdings. Year-to-date the fund has returned 11.97% and it holds a 3-star rating from Morningstar.

The Allianz NFJ Dividend Value A (PNEAX) is a large-cap value fund with assets totaling $8.2 billion. Slightly more than 19% of assets are invested in energy stocks, and Conoco is the fund’s second largest holding. Year-to-date the fund has returned 8.52%, and it holds a 2-star rating from Morningstar.

The American Century Income & Growth A (AMADX) is a large value fund with total assets of$1.6 billion. Energy stocks comprise more than 13% of the fund’s portfolio, with the top two fund holdings being Exxon and Chevron. Conoco is not among the fund’s top 25 holdings. The fund has returned 8.51% so far in 2011, and it holds a 2-star rating from Morningstar.

Can a undervalued Conoco help a $1 billion+ fund of which it makes up less than 5% of total assets? It probably won’t make a huge positive difference in the overall performance of fund if Conoco is present in the portfolio. But a fund portfolio that depends heavily on Exxon and Chevron and excludes Conoco could well be leaving money on the table.

Paul Ausick