It is becoming a familiar narrative: Oil prices are slumping, U.S. stocks are rising and energy equities along with the relevant exchange traded funds are reacting more to oil prices than broader market behavior.
The Energy Select Sector SPDR (NYSEArca: XLE) was once the top performer among the nine sector SPDR ETFs earlier this year. Now, XLE, the largest equity-based energy ETF, is the only one of the nine SPDRs that is in the red year-to-date.
Underscoring just how painful the energy sector’s decline has been of the 20 worst-performing ETFs over the past 90 days, 12 are energy ETFs. Only downtrodden gold miners ETFs are keeping the First Trust ISE-Revere Natural Gas Index Fund (NYSEArca: FCG) and the SPDR Oil & Gas Equipment & Services ETF (NYSEArca: XES) from being among the worst of the worst ETFs over that period. [Natty’s Plunge Plagues This ETF]
However, sentiment surrounding the energy sector is perhaps overly negative and that could be creating a buying opportunity for savvy investors.
Portfolio manager Patrick O’Shaughnessy “said downward oil price moves generally cause broad stock price declines. But those declines are then followed an enduring run-up in prices, averaging 18.94% for all large energy stocks over a one-year time frame,” reports Trevor Hunnicutt for InvestmentNews.
Some investors are nibbling at energy stocks again. XLE has added nearly $333 million in new assets this quarter, a far cry from the time earlier this year when XLE was by far the top asset gatherer among sector ETFs, but still better than the $1.3 billion the fund bled in the third quarter.