Tag: $XLE

Posted on

Monday, November 9th, 2020, Marked A Historic Inflection Point Following Up On The March 9th, 2020, Inflection Point

2020 has been a year that will stand out in the history books. Financial markets have seen their own share of history in 2020, including significant inflection points, both those readily apparent, and those that have existed behind the scenes.

In the energy sector, March 9th, 2020 was a significant inflection point, where many energy equities, including Occidental Petroleum (OXY) declined over 50% in a single trading session, and alternatively, leading natural gas equities, including EQT Corp. (EQT), Cabot Oil & Gas (COG), and Southwestern Energy (SWN) actually finished higher amid the energy carnage, as I chronicled and outlined in the following two public articles.

The Long Oil, Short Natural Gas Trade Is Officially Dead

The United States Natural Gas Fund Was Up On A Historic Down Day For Energy

While natural gas equities have shined in the energy complex in 2020, energy stocks, and value stocks have generally continued to be out-of-favor, however, the inflection point might have been reached on November 9th, 2020.

A Record Change In The Relative Performance Of Momentum Stocks Occurred On November 9th, 2020.
S&P 500 Equal Weight ETF (RSP) Had Its Best Relative Performance Day Versus SPDR S&P 500 ETF (SPY) Ever On November 9th, 2020!
FAANG Stocks Had Worst Relative Performance Day Since Acronym Gained Popularity On November 9th, 2020!

Takeaway Thoughts

Sometimes an inflection point is obvious, hitting an observer over the head, and sometimes it is more discreet, requiring some time to appreciate what has transpired. With energy stocks, which are the fulcrum of the value opportunity, continuing to outperform this past week ending Friday, November 20th, 2020, including the Energy Select SPDR Fund (XLE) rising 5.7%, the SPDR S&P Oil & Gas Exploration & Production ETF (XOP) rising 6.6%, and the VanEck Vectors Oil Services ETF (OIH) rising 10.9%, while the SPDR S&P 500 ETF (SPY) declined 0.8%, and the Invesco QQQ Trust (QQQ) declined 0.2%, market participants may look back to November 9th, 2020, and view it as a line of demarcation between the “Have’s” and the “Have Not’s”.

Posted on

Natural Gas Equities Are Leading & They Are Just Getting Started

The broader equity market bottomed on March 23rd, 2020, and since then the SPDR S&P 500 Index ETF (SPY) is higher by 29.1%, and the Invesco QQQ Trust (QQQ) is higher by 34.8%, as shown in the chart below.

Somewhat inconspicuously, precious metals equities, as measured by the VanEck Vector Gold Miners ETF (GDX), have risen 73.0% since the March 23rd broader market low, energy equities, as measured by the Energy Select Sector SPDR Fund (XLE) and the SPDR S&P Oil & Gas Exploration & Production ETF (XOP), have risen 52.1% and 62.0%, respectively, from the March 23rd broader market low, and basic material stocks, as measured by the SPDR S&P Metals & Mining ETF (XME), which have risen 39.5% since the March 23rd broader market low.

Said another way, inflation sensitive and economically sensitive equities are quietly outperforming.

Leading the pack above, all, are natural gas equities, led by Antero Resources (AR), which I have previously called a generational buying opportunity.

At the time of this publication, I was routinely mocked, much as I was in 2008 and 2009, before this happened.

How did I achieve this performance?

Simply put, it was buying undervalued equities, like General Growth Properties, in November of 2008, that almost nobody else wanted.

As I have said previously, these purchases, in aggregate, totaled $53,593.71, which was not a big dollar total in aggregate, however, the 120,000 shares were a nice stake in what would become the best performing S&P 500 equity in the bull market, at least through March 10th, 2017, as this CBS MarketWatch article on the bull market turning 8 years old chronicled.

In March of 2018, in the Brookfield Property Partners deal, these shares could be exchanged for $23.50 in cash.

Not a bad return at all, however, the key was to buy into the panic. That is the same thing we have done this time, and now we will see if the proverbial Main Course plays out in front of our eyes.

Best of luck to everyone. Stay healthy, safe, and happy,

WTK