Banking

New Oil Barons Strike It $329 Billion Richer On Powerful Rally

“Clean energy” might get all the attention. But this year, investors in traditional S&P 500 energy stocks are getting filthy rich — to the tune of $329 billion just this year — even as they’re just 3% of the index.




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All 23 stocks in the S&P 500 energy sector, including Marathon Oil (MRO), Exxon Mobil (XOM) and EOG Resources (EOG), are higher this year. Together they’ve added more than $300 billion in market value, says an Investor’s Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith. Energy is the only S&P 500 sector where every single constituent stock is up in 2021 so far.

And all told, the Energy Select Sector SPDR ETF (XLE) is up 41% this year — ranking it No. 1 among all 11 S&P 500 sectors. And that doesn’t even include the sector’s 7.7% dividend yield.

While politicians talk about clean energy, the surging price of oil is flowing right into the portfolios of investors in the sector. “Crude prices are rallying alongside the broader market rally as the dollar slides,” said Edward Moya, senior market analyst of Oanda.

S&P 500 Energy Stocks Leave “Clean Energy” In The Dust

What’s even more astounding is how strong S&P 500 energy stocks are compared to clean energy. Hopes soared for electric vehicles and renewable energy coming into the year.

But now, the price of light crude oil on the Nymex has nearly doubled from its 52-week low. And all three of the largest alternative energy ETFs are down this year. That comes just one year after oil giant Exxon Mobil was kicked out of the Dow Jones Industrial Average, and Tesla (TSLA) joined the S&P 500.

Compare the gains in Energy Select Sector ETF to the massive losses of alternative energy plays. The $3 billion in assets iShares Global Clean Energy ETF (ICLN) is down 23.5% this year. And the Invesco Solar (TAN) ETF is down 29.4% this year while the Invesco WilderHill Clean Energy ETF (PBW) is off 27%.

Big S&P 500 Energy Winners

It’s almost hard to not make money on S&P 500 energy stocks this year. They’re up anywhere from 8% to upward of 77%.

Marathon Oil is the top S&P 500 energy stock on a percentage basis. Shares skyrocketed more than 76% this year as investors see the company making an adjusted $475 million, or 58 cents a share, in 2021. That’s a dramatic roundabout from the $919 million, or $1.16 a share, it lost in 2020. The Houston-based explorer for oil and natural gas has gained more than $4 billion in market value this year.

It’s not just speculation, either. Some S&P 500 energy stocks are seeing improving fundamentals.

EOG Resources is another Houston-based oil producer. But it sports a solid IBD Composite Rating of 95. That means its profit growth and chart action outranks 95% of all other companies’. Certainly, the stock’s 66.9% jump this year helps. But the company already turned an adjusted profit of $850 million, or $1.46, in 2020. Analysts think it’ll make another $3.5 billion, or $5.85 a share, this year.

But when it comes to raw market gains, Dow outcast Exxon Mobil is the S&P 500 energy stock to beat. Shares are up 47% this year so far. When you’re taking about a company valued at $256 billion, though, that’s enough to pad portfolios by $82 billion just this year.

Exxon Mobil is on the verge of getting revenge on all its doubters this year. Activists are pressuring it to reduce reliance on fossil fuels. And yet, analysts say Exxon Mobil is on pace to gush an adjusted profit of $14.9 billion, or $3.50 a share. That’s 60% more than the $9.3 billion in profit Amgen (AMGN) — which replaced it in the Dow — is expected to make this year.

You’re Likely Underexposed To Energy

Impressed with the S&P 500 energy rally? Don’t assume you’re covered if you own the S&P 500.

Even following the powerful rally, the energy sector only makes up 2.9% of the SPDR S&P 500 ETF Trust (SPY). And that means you’re largely missing out on the biggest rally of the year.

Top S&P 500 Energy Stocks

All stocks in the sector are higher in 2021 so far

Company Symbol % ch. YTD Market value gain YTD ($ billions) Composite Rating
Marathon Oil (MRO) 76.9% $4.0 60
Devon Energy (DVN) 66.9% $11.8 79
EOG Resources (EOG) 65.6% $19.1 95
Diamondback Energy (FANG) 62.6% $6.6 94
Hess (HES) 59.7% $9.7 83
APA (APA) 51.9% $2.8 77
Schlumberger (SLB) 50.3% $15.4 72
Exxon Mobil (XOM) 47.4% $83.0 57
Marathon Petroleum (MPC) 45.3% $12.3 64
Occidental Petroleum (OXY) 45.0% $7.3 52
Sources: IBD, S&P Global Market Intelligence

Follow Matt Krantz on Twitter @mattkrantz

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