Oil this month fell below $40 a barrel, triggering significant losses for shareholders of energy companies. But it’s not all pain and no gain.

Zacks Investment Research has identified three exchange-traded funds that stand to benefit from oil’s 60 percent drop in the past two years. Pressures fell as OPEC countries maintained steady oil output to pressure shale drillers that boosted U.S. energy production to the highest levels in 40 years.

“Losses in the energy sector can actually translate into gains for some other sectors,” Zacks says in a blog post on the Seeking Alpha website. “While auto and transportation are the direct beneficiaries, sectors such as retail, consumer discretionary and consumer staples also gain from low oil prices.”

And low oil prices aren’t expected to be a short-term phenomenon, as U.S. stockpiles of crude are at the highest level in 80 years, according to the Energy Information Administration.

“Oversupply has distressed the industry for a long time,” according to Zacks. “Lower consumption across the world is the reason for lower demand. Europe and Japan continue to struggle even as they make vigorous efforts to boost their flagging economies.”
Meanwhile, China’s economic growth has slowed, damping demand for raw materials such as oil, iron ore, copper, nickel and zinc.

“The biggest worry on this front is China,” Zacks says. “The world's second largest economy may never again experience the pace of growth it witnessed until recently, leading to falling demand even in the long term.”

3 Funds That May Gain From Crude's Loss

1. Fidelity Select Automotive Portfolio (FSAVX): As the price for oil drops, transportation costs also fall. This Fidelity fund “invests a majority of its assets in companies that manufacture, market and sell automobiles, trucks, specialty vehicles, parts, tires, and related services. The non-diversified fund invests in both U.S. and non-U.S. companies, primarily in common stocks.”
2. Fidelity Select Consumer Discretionary Portfolio (FSCPX): Lower oil prices translate into lower heating and gasoline costs, freeing up money for consumers to spend on shopping, dining out and travel. This Fidelity fund “invests a lion's share of its assets in securities of companies mostly involved in the consumer discretionary sector. FSCPX primarily invests in common stocks of companies all over the globe. Factors including financial strength and economic condition are considered before investing in a company.”
3. Putnam Global Consumer A (PGCOX):  This fund also invest in consumer-related companies. It “has gained respectively 6.3 percent and 5.3 percent in the year-to-date and one-year period. The 3- and 5-year annualized returns are 13.9 percent and 11 percent, respectively.”

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