A Live Lesson in Value-Investing: The Energy Meltdown

A Live Lesson in Value-Investing: The Energy Meltdown

July 10, 2015 $xle, $xlv, Value Investing Research
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We sat down and did a quick and dirty analysis of the S&P sector ETFs on a YTD basis and over the past 2 months.

Here are the sector portfolios we used for our analysis:

  • XLE Energy
  • XLF Financials
  • XLU Utilities
  • XLK Technology
  • XLB Materials
  • XLP Consumer Staples
  • XLI  Industrials
  • XLV  Health Care
  • Results are net of management fees and transaction costs. All returns are total returns and include the reinvestment of distributions (e.g., dividends). Data is from Bloomberg.

In Q1, healthcare and energy were cheap on a relative basis, but a value investor needed to be prepared for short-term volatility: healthcare’s future was/is unclear and oil prices were on a roller coaster ride!

Well, sure enough, the short-run volatility showed up!

Here are the YTD charts for the sector SPDR ETFs:

ytdsector

  • Health Care did the best by generating a total return of 9.7%
  • Utilites did the worst by losing 7.5% YTD
  • Energy has been on a whipsaw rollercoaster!

Here are the performance figures over the past 2 months–a volatile time in the market:

2monthsector

  • Health Care maintained strong relative performance
  • Energy did the worst by losing 7.9% over the past 2 months!

Value investors managed to catch a breather with healthcare, but energy investing has tried the patient of investors focused on the short-term!


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About the Author

Wesley R. Gray, Ph.D.

After serving as a Captain in the United States Marine Corps, Dr. Gray received a PhD, and was a finance professor at Drexel University. Dr. Gray’s interest in entrepreneurship and behavioral finance led him to found Alpha Architect. Dr. Gray has published three books: EMBEDDED: A Marine Corps Adviser Inside the Iraqi Army, QUANTITATIVE VALUE: A Practitioner’s Guide to Automating Intelligent Investment and Eliminating Behavioral Errors, and DIY FINANCIAL ADVISOR: A Simple Solution to Build and Protect Your Wealth. His numerous published works has been highlighted on CBNC, CNN, NPR, Motley Fool, WSJ Market Watch, CFA Institute, Institutional Investor, and CBS News. Dr. Gray earned an MBA and a PhD in finance from the University of Chicago and graduated magna cum laude with a BS from The Wharton School of the University of Pennsylvania.