Daily Management Review

Energy sector shares rise in price by half since beginning of 2021


Shares in energy companies have gained 54% since the beginning of the year. In the last month alone, they have gained 19%. Investors who have been betting on green energy in recent years are missing out on an opportunity to make money.

Shares in energy companies in the S&P 500 Index, which includes the largest companies by capitalisation in the US, have risen 54% this year, The Wall Street Journal wrote. At the same time, the index as a whole has gained only 21% in almost 10 months. The gap from the second best-performing sector within the S&P 500 this year was about 16 percentage points. Only twice since 2000 has the gap between the top two sectors in the index been bigger, the WSJ cited Dow Jones Market Data.

Growth in the sector has taken a toll on market participants who have turned down investments in it and bet on green energy companies, the WSJ noted. Companies such as Devon Energy and EOG Resources, among others, have appreciated this year. Many investors have scaled back their positions in them as these companies lagged the S&P 500 for eight out of nine years through 2020, the newspaper wrote.

Now investors who have exited positions in the energy sector cannot take advantage of its growth - the sector has added 19% in the last month alone. The S&P 500 as a whole is up only 3% over the same period, the WSJ reported. Investors now need to consider whether the prospect of high profits outweighs their views on climate issues, the publication added.

Energy stocks could rise even more, suggests Lee Baker, president of Apex Financial Services, according to the WSJ. Baker advises holding such securities for the time being. Some of the investor's clients still prefer to limit their investments in the energy sector for environmental reasons, the paper noted.

source: wsj.com