A Live Lesson in Value-Investing: The Energy Meltdown

A Live Lesson in Value-Investing: The Energy Meltdown

July 10, 2015 Value Investing Research, $xle, $xlv
Print Friendly
(Last Updated On: July 10, 2015)

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!


Note: This site provides NO information on our value investing ETFs or our momentum investing ETFs. Please refer to this site.


Join thousands of other readers and subscribe to our blog.


Please remember that past performance is not an indicator of future results. Please read our full disclosures. The views and opinions expressed herein are those of the author and do not necessarily reflect the views of Alpha Architect, its affiliates or its employees. This material has been provided to you solely for information and educational purposes and does not constitute an offer or solicitation of an offer or any advice or recommendation to purchase any securities or other financial instruments and may not be construed as such. The factual information set forth herein has been obtained or derived from sources believed by the author and Alpha Architect to be reliable but it is not necessarily all-inclusive and is not guaranteed as to its accuracy and is not to be regarded as a representation or warranty, express or implied, as to the information’s accuracy or completeness, nor should the attached information serve as the basis of any investment decision. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission from Alpha Architect.


Definitions of common statistics used in our analysis are available here (towards the bottom)




About the Author

Wesley R. Gray, Ph.D.

After serving as a Captain in the United States Marine Corps, Dr. Gray earned a PhD, and worked as a finance professor at Drexel University. Dr. Gray’s interest in bridging the research gap between academia and industry led him to found Alpha Architect, an asset management that delivers affordable active exposures for tax-sensitive investors. Dr. Gray has published four books and a number of academic articles. Wes is a regular contributor to multiple industry outlets, to include the following: Wall Street Journal, Forbes, ETF.com, and the CFA Institute. 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.


  • Arthur

    I noticed that QVAL is missing companies in certain industries that you would otherwise see just by running a typical value + F Score screen. For instance, QVAL doesn’t seem to hold many (any?) companies whose revenues are tied to commodities (gold, coal, steel, oil, gas, etc.). It also seems to omit airlines. Is this by design?