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  • Roger S. Conrad

Dumping the Weak, Adding to the Strong

By Roger S. Conrad on Jun. 18, 2020

The rally in energy stocks from mid-March has taken a breather. On June 8, the S&P 500 Energy Sector Index reached its highest point since early February, up 97 percent from its March 18 low. A few days later, it was down more than 17 percent.

Other indexes have followed the same pattern. Super majors-focused NYSE Arca Oil Index (NYSE: XOI) returned better than 105 percent from mid-March to June 8, only to give back roughly 17 percent. And the midstream-heavy JP Morgan Alerian MLP Index ETN (NYSE: AMJ) retreated 16 percent, after running higher by 152 percent.

Even at their most recent peak, none of these indexes were anywhere close to where they started 2020. But like the rest of the stock market and oil prices, they had come a long way in a great hurry. And that’s typically when a market takes a breather.

As energy stocks have climbed the past few months, we’ve consistently emphasized the need to focus on the best in class companies. At the same time, we’ve warned not to confuse rallies in weaker companies as a sign of underlying business improvement. Rather, this is likely to be a last, best opportunity to unload them.

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    • Elliott H. Gue

      Founder and Chief Analyst: Capitalist Times and Energy & Income Advisor

    • Roger S. Conrad

      Founder and Chief Analyst: Capitalist Times and Energy & Income Advisor