Hello,

We noticed you're browsing in private or incognito mode.

To continue reading this article, please exit incognito mode or log in.

Not an Insider? Subscribe now for unlimited access to online articles.

Business Impact

Financial Indices: And the Rich Get Richer

Energy investors get great stock performances–plus cash!

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.

The good news for investors: in lieu of drilling too many new holes, these companies have been giving that money back to shareholders in the form of dividends, share repurchases, and debt payments.

The broader market has held up even as oil prices have shrugged off gravity. The SP 500 barely outpaced the TR Large-Cap 100 in notching a 1.1 percent gain through July 8, and our small-cap index was not far behind. All three indices are in the black for the past 12 months, with small stocks showing a 24.9 percent gain. – By Duff McDonald

Couldn't make it to EmTech Next to meet experts in AI, Robotics and the Economy?

Go behind the scenes and check out our video
More from Business Impact

How technology advances are changing the economy and providing new opportunities in many industries.

Want more award-winning journalism? Subscribe to Insider Plus.
  • Insider Plus {! insider.prices.plus !}*

    {! insider.display.menuOptionsLabel !}

    Everything included in Insider Basic, plus the digital magazine, extensive archive, ad-free web experience, and discounts to partner offerings and MIT Technology Review events.

    See details+

    Print + Digital Magazine (6 bi-monthly issues)

    Unlimited online access including all articles, multimedia, and more

    The Download newsletter with top tech stories delivered daily to your inbox

    Technology Review PDF magazine archive, including articles, images, and covers dating back to 1899

    10% Discount to MIT Technology Review events and MIT Press

    Ad-free website experience

/3
You've read of three free articles this month. for unlimited online access. You've read of three free articles this month. for unlimited online access. This is your last free article this month. for unlimited online access. You've read all your free articles this month. for unlimited online access. You've read of three free articles this month. for more, or for unlimited online access. for two more free articles, or for unlimited online access.