Jason Goepfert, the Editor of www.Sentimentrader.com has done yeoman’s work in chronicling just how ugly things have gotten in the energy sector, how much the sector is loathed and how this type of action – usually – leads to a rally. More on that a little later.
I highlighted some info from www.Sentimentrader.com regarding energy executive insider buying here. So, is this the exact right time to take the plunge and dive headlong into the deep end of the energy pool? It beats me. I certainly do find the “washed out” case to be compelling. But I for one will be waiting at least until December 1st.
Figure 1 displays the cumulative % gain for Fidelity Select Energy Services (used as a proxy for the energy industry) ONLY during the months of October and November every year since 1986. It’s not pretty.
Figure 1 – FSESX Oct-Nov ONLY cumulative %; 1986-2019
Figure 2 displays the relevant facts and figures.
Figure 2 – Relevant Facts and Figures
Figure 3 displays year-by-year total return results for FSESX during the months of October and November.
| Year | FSESX Oct/Nov % +(-) |
| 1986 | (0.2) |
| 1987 | (42.7) |
| 1988 | (7.5) |
| 1989 | 3.2 |
| 1990 | (11.2) |
| 1991 | (10.7) |
| 1992 | (7.1) |
| 1993 | (11.8) |
| 1994 | (1.4) |
| 1995 | (3.5) |
| 1996 | 15.6 |
| 1997 | (8.9) |
| 1998 | (12.7) |
| 1999 | 2.4 |
| 2000 | (24.2) |
| 2001 | 23.3 |
| 2002 | 12.2 |
| 2003 | (3.0) |
| 2004 | 5.8 |
| 2005 | (0.7) |
| 2006 | 13.4 |
| 2007 | (4.7) |
| 2008 | (44.2) |
| 2009 | (0.8) |
| 2010 | 16.1 |
| 2011 | 24.3 |
| 2012 | (4.6) |
| 2013 | 1.9 |
| 2014 | (22.1) |
| 2015 | 10.0 |
| 2016 | 10.5 |
| 2017 | (5.8) |
| 2018 | (27.8) |
| 2019 | (0.4) |
Figure 3 – FSESX October-November Year-by-Year
Summary
In 2001 FSESX advanced +23.3% during Oct/Nov and in 2011 it rallied +24.3% during Oct/Nov. So, there is no reason energy stocks cannot surprise the investment world and launch a rip-roaring rally in the months directly ahead, especially given how beaten down and unloved they are at the moment.
Still, investing is a game of odds. Given that energy stocks have showed a gain only 35% of the time during October and November, I for one intend to “exhibit a bit more patience.”
For a possible glimpse of the future however, please consider Figure 4 from www.Sentimentrader.com, which displays what has happened in the past after a flurry of dividend cuts in this sector. 6 months to 2-year returns have been positive 100% of the time.
Figure 4 – Energy sector performance after 4 or more dividend cuts among constituent stocks of ticker XLE (Courtesy Sentimentrader.com)
Bottom line: Don’t go to sleep on energy stocks – but maybe hit the “Snooze” button one more time.
See also Jay Kaeppel Interview in July 2020 issue of Technical Analysis of Stocks and Commodities magazine
See also Jay’s “A Strategy You Probably Haven’t Considered” Video
See also Video – The Long-Term…Now More Important Than Ever
Jay Kaeppel
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