fund manager portfolios relative to history. In short, it’s not debatable – energy stocks are as cheap and hated as they have been in either of the last two market busts. You might view this as a negative... But I view it as an incredible opportunity.
350%
Energy Select Sector SPDR Fund (XLE) XLE rallied almost 400 % in the mid-2000s
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0% 50%
2003
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WHY BIG ENERGY COULD SOAR HUNDREDS OF PERCENT
Pull quote. Pull quote. Pull quote. Pull quote. Pull quote. Pull quote. Pull quote. Pull quote. Following the dot-com bust, the U.S. economy went into recession. Oil prices fell 30% from May 2001 to late September of that year. The unemployment rate jumped from 3.8% in April 2000 to 5.8% by mid-2002. In short, these were tough times all around. Yet buying energy stocks in mid-2002 – in the thick of the crisis – was one of the greatest opportunities of the last two decades. We can see it through the energy fund I mentioned above... The Energy Select Sector SPDR Fund (XLE) holds the bluest of blue chips in the energy space. I’m talking about companies like Exxon, Chevron, and ConocoPhillips. It can be hard to move the needle with these big companies. And yet, XLE soared 390% from mid-2002 to its eventual peak in 2008. Take a look above... Again, buying XLE in 2002 was a bold move. The U.S. was at war. The unemployment rate was up. And oil prices had fallen more than 50% from their 2000 peak to their early 2002 lows.
“Steve, why on earth would I want to invest in oil? It’s been a poor performer for years.” Look, I hear you. Oil has lost almost half its value since peaking in 2018. And it’s been absolutely clobbered in the past year. States in the U.S. are still on lockdown. And the travel market is down dramatically as folks stay at home to fight the pandemic. While the economy is starting to recover, the U.S. is still in a recession. So why am I so excited about investing in the energy market today? It’s because buying energy stocks during a crisis can lead to life-changing gains . I’m not kidding... Buying this sector when the economy is in shambles can lead to hundreds- of-percent gains very quickly. It has happened time and time again. Let’s look at the early 2000s, for example.
American Consequences
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