Oh, to have foreseen this spike in oil prices and to have dumped all our money into energy stocks. More precisely, to have realized that when everyone thought the easy money had already been made, there were still some pretty easy returns sitting right there on the table.
Energy stocks again led our large-cap index, in the month ending July 8, and were outpaced in the small-cap index solely by biotechnology issues. The only mystery to us is the continuing dismal performance of First Calgary Petroleums–a stock that’s become almost comical in its ability to act as a contrary indicator to its own sector.
So what are these lucky energy companies doing with all their newfound cash? Interestingly enough, they’re putting it aside for a rainy day. According to Arnie Berman, analyst at Creditsights, energy companies in the SP 500 saved 15 cents of every dollar in the past year–a rate five times as high as the average company’s. Berman suggests that the smart money in the sector (i.e., its executive suite) either doesn’t think the high prices will endure, has limited confidence in its own long-term growth prospects, sees few opportunities to spend that money wisely, or all the above.
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