Oil stocks and the energy sector have been under pressure for some time — and that pressure doesn’t appear to be letting up in 2015.
Since spring 2011, most major players have gone nowhere, with U.S. mega-caps Exxon Mobil Corporation (NYSE:XOM) and Chevron Corporation (NYSE:CVX) basically flat in the last four years and global oil powerhouses BP plc (ADR) (NYSE:BP), Royal Dutch Shell plc (ADR) (NYSE:RDS.A, NYSE:RDS.B) and PetroChina Company Limited (ADR) (NYSE:PTR) all down by double digits.
Believe it or not, some of that stretch was actually in a much more favorable market for crude oil, comparatively speaking. Look at this chart of West Texas Intermediate crude oil prices, or WTI, dating back to the recession and you’ll see that oil had been over $100 for a few stretches before this recent crash.
As a result, if you simply took the performance of big-name energy stocks through the middle of 2014, you’d still be facing significant underperformance.
By way of example: The S&P 500 rose almost 40% across the three years from April 2011 to April 2014 — well before crude oil prices got cut in half from their highs. By comparison, XOM stock was up roughly 15% and Chevron was up about 10%; global mega-cap oil stocks performed even worse.
Going forward, the situation won’t improve much, either. The one bright spot in the energy sector over the last few years has been prolific production in the U.S. to offset soft prices, but reports indicate that is all but over.
According to a great Bloomberg report this week, “The shale oil boom that pushed U.S. crude production to the highest level in four decades is grinding to a halt.” Futures are at a six-year low, rig counts continue to drop as oil companies lay off workers and curtail production, and the overall picture is pretty darn bleak.
Throw in a persistently strong dollar as the U.S. economic picture improves and foreign economies in Euorpe and China continue to struggle, and it’s hard to imagine crude oil going anywhere higher in the next year or so.
Will oil prices eventually stabilize? You bet. Will Exxon Mobil go bankrupt? No way.
But before you think about bargain hunting in energy stocks, look at this nasty performance and consider selling these stocks rather than adding to your position.
- Exxon Mobil Corporation (NYSE:XOM) — 12-month return of -12%, five-year price return of +25%
- Chevron Corporation (NYSE:CVX) — 12-month return of -9%, five-year price return of +35%
- Royal Dutch Shell plc (ADR) (NYSE:RDS.A) — 12-month return of -18%, five-year price return of +4%
- BP plc (ADR) (NYSE:BP) — 12-month return of -12%, five-year price return of -30%
- Total SA (ADR) (NYSE:TOT) — 12-month return of -23%, five-year price return of -10%
- PetroChina Company Limited (ADR) (NYSE:PTR) — 12-month price return of +12%, five-year return of +4%
- ConocoPhillips (NYSE:COP) — 12-month return of -6%, five-year price return of +22%
By comparison, the S&P 500 index has a 12-month return of +14%, and five-year price return of +75%.
Jeff Reeves is the editor of InvestorPlace.com and the author of “The Frugal Investor’s Guide to Finding Great Stocks.” As of this writing, he did not hold a position in any of the aforementioned securities. Write him at firstname.lastname@example.org or follow him on Twitter via @JeffReevesIP.
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