If you are reading this, I know that you are interested in the energy sector, and therefore you are aware that 2022 was an outstanding year for energy stocks.
The sector ETF, XLE, delivered a total return of over 64%, which is impressive enough on its own, but when put in the context of a year when the broad equity benchmark, the S&P 500, lost 18.1% is truly remarkable. As I have said here before that has resulted in some serious schadenfreude for those of us who remained loyal to energy during years of underperformance, and particularly for pundits like me who were mocked for saying that oil wasn’t dead and that would be resurgent at some point.
As sweet as the taste of revenge is, though, it is the results in our portfolios that matter. So, now that we have established that we are smarter than the average bear, how can we keep the run of positive results going in 2023?
If you read what I wrote at the end of last year, you will know that I am not particularly bullish on oil over the year. In fact, I have already said that I expect crude to finish they year lower than it starts it. What we found out at the end of last year, though, was that after such woeful underperformance for so long, energy stocks can post big gains without crude moving higher. That can easily be seen when you look at a 6-Month chart for two ETFs, XLE, which tracks energy stocks, and USO, which tracks crude futures prices.
During that time USO fell 12%, while XLE gained…