Five emerging energy plays

March 23, 2016 01:00 PM

WTI Crude has been on a steep downward trend, dropping more than 75% in about 18 months. At the time of this writing, WTI had recently hit a 12-year low, briefly dipping below $27 per barrel. As a result, oil and gas producers, equipment service and distribution companies all have seen sharp declines in their share prices. Performance like this can be particularly damaging to investors’ portfolios. Smart Momentum analytics can spot negative trends early, helping to limit downside, capture and protect profits while improving risk control and portfolio performance. Here, Trendrating’s Smart Momentum analytics explores momentum in global oil and gas stocks.

“Energy report card” shows the current distribution of momentum in this sector as well as the average performance of each rating. 

As we can see, nearly 73% of oil and gas stocks are currently exhibiting negative momentum. However, about 18% of stocks are in an established upward trend (A-rated) and these have an average return (since rated) of about 20%. 

The Momentum Ratings changes over the last three months shows that the vast majority, over 50% of issued ratings, have been for stocks entering established bear trends (“D” rating). These results are consistent for a sector in a long-term negative trend.

How widespread is the damage? “A tough year” shows the average performance of oil and gas stocks for various countries, since individual stocks moved to a negative rating. On average, oil and gas stocks are down 35% by this metric with Saudi Arabia, Singapore, Indonesia and Egypt leading the way.  

When we look at the three-month performance of securities that have been rated for at least that period of time, we find that our best performing stocks are in emerging markets, while our worst performers are in developed markets.

The performance of oil and gas stocks has tracked the price of oil downward. Performance of this sector has been bad in most global markets. Despite this dislocation, those still seeking to invest in this sector will find that emerging markets in Asia and Europe have the highest momentum in a relatively low momentum environment.

About the Author

Rocco Pellegrinelli, Trendrating founder & CEO, began his career as a portfolio manager and investment banker and has since been a proven fintech entrepreneur for the past 20 years. He created Brainpower in 1996 and established it as one of the top portfolio management systems globally. After going public on the Frankfurt Stock Exchange in 2000, Brainpower was acquired by Bloomberg in 2006. @trendrating