Gavekal Capital: Washed Out Energy Sector Bounced Today

Tuesday, October 21, 2014

Washed Out Energy Sector Bounced Today

The energy sector has been the hardest hit sector over the past month as well as over the past year. On an equal-weighted basis, the energy sector is down 14.7% over the past month and down 9.7% over the past year. To put that in perspective the average stock in the MSCI World Index is down 7.7% over the past month and down only 0.8% over the past year. Note all statistics are as of the close yesterday unless otherwise stated.

Is it any surprise then that the energy sector is on top of the daily leaderboard today as the MSCI World is advancing nearly 1.5%? Not really, as we will show in the charts below, the energy sector has been much more oversold relative to the headline index, The energy sector was the best performing sector in the MSCI North America index as well as the MSCI Europe index today.

Performance on 10/21 (all prices in USD)
MSCI World

MSCI North America

MSCI Europe

Only 9% of of MSCI World energy stocks are trading above its 200-day moving average and only 39% of stocks have its 50-day moving average above its 200-day moving average. We have actually experienced an increase in the percent of energy stocks trading above its 200-day moving average. It hit a low of only 4% on 10/14. The lowest level since 2012.

The median energy stock is down 9% while the the median MSCI World stock is down only 1% over the last year.

Only 28% of energy stocks are outperforming the MSCI World Index over the past year. This compares to 44% of all stocks in the MSCI World Index that have outperformed over the past year.

29% of energy stocks have positive performance year-to-date. This compares to 38% for the MSCI World Index as a whole.

Finally, the average stock is 18% from its 1-year, nearing bear market territory. While the average stock in the energy sector is firmly in bear market territory as it is down 27% from its 1-year high.

About Gavekal Capital

Gavekal Capital is a US registered investment advisory firm that manages the Gavekal Knowledge Leaders Strategy. Knowledge Leaders are a group of the world’s leading innovators with deep reservoirs of intangible capital. These companies often possess competitive advantages such as strong brand, proprietary knowledge or a unique distribution mechanism. Knowledge Leaders are largely service-based and advanced manufacturing businesses, often operating globally. Gavekal Capital seeks to identify the world’s leading knowledge companies through a proprietary process that analyzes corporate knowledge investments.
We offer the Gavekal Knowledge Leaders Strategy in multiple products for global investors. For more information about our product offerings please visit http://www.gavekalcapital.com.
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