Brave speculators score on energy stocks

AP OIL PRICES ENVIRONMENT F FILE USA ND

AP

 

Falling oil prices this year have sent investors running out of energy stocks. But Tuesday, energy stocks were a gusher of gains for speculators.

The average energy stock in the Standard Poor’s 500 index is up 1.2%, a pleasant reversal of fortunes for energy investors pummeled all year. The average SP 500 energy stock is down 12% this year, while the SP 500 itself is up 11%.

Some of the energy stock gains are impressive. Among the energy stocks posting the largest gains include:

BIGGEST GAINS BY SP 500 ENERGY STOCKS

Sources: SP Capital IQ, USA TODAY research

Even some of the majors are having a good day. Shares of Chevron (CVX) are up 2.4% and Exxon Mobil (XOM) is up 2.2%.

Why are energy stocks bouncing? It’s not oil prices. The price of West Texas Intermediate fell another 1.5% today. The iPath SP GSCI Crude Oil exchange-trade note, which trades the prices of oil, is down a crushing 30% this year, punishing oil investors.

But what’s working in energy stocks’ favor? Lower prices, says Sam Stovall, strategist at SP Capital IQ in a note to clients. Over the past 12 months, the SP Energy Index is 20% below the SP 500, he says. Energy stocks have traded this poorly just six times since 1990, and in all six times the index posted positive gains in the following 24 months and beat the SP 500 five of those six instances, Stovall says.

Speculators are betting the pain will soon be their gain. “Domestic and global energy stocks and sectors have taken it on the chin in the past year on worries surrounding global economic growth and oil supply. And while it’s too soon to say that the end of the concern is behind us, (as well as the resulting pressure on oil prices), it may be time to begin thinking about increasing exposure to domestic and global energy sector ETFs, provided you have the patience to wait anywhere from 12 to 24 months,” Stovall says.