January 28th, 2006

Oil & Gas Stocks in IBD100

Unless you’ve lived in cave this past year, you’re aware that Oil & Gas was the hottest sector for more than a year as international demand exploded and the price of oil skyrocketed. I wrote about them here on December 30.

The number of stocks in the sector making it onto the IBD 100 list rose and fell pretty much in synch with fluctuations in oil prices. After increasing from 3 stocks on the May 20, 2005 list to an incredible peak of 33% of the list for the week of August 12, 2005, the number of energy stocks dropped back down to the mid-teens in October-December. The number of Oil&Gas stocks on the list in various weeks were:

But this week, Oil & Gas stocks increased again to 28% of the IBD 100 list (28 out of 100, that is). So you’re like me, you’re probably asking, “is there anything that this tells us?”

First let’s take a look at the specific Oil & Gas stocks that have made the list. Over the 43 weeks, since I started monitoring it in detail, Southwestern Energy (SWN) has made it to the list every week. As a matter of fact, SWN and Quality Systems (QSII) are the only stocks to earn that distinction with Tenaris (TS) and Google (GOOG) being runners up at missing only one week each. Other Oil & Gas stocks frequently on the list (including number of weeks on list) are:

  • Oil States International (OIS) – 38
  • Lufkin Industries (LUFK) – 37
  • Valero Energy (VLO) – 37
  • Cal Dive International (CDIS) – 32
  • Ultra Petroleum (ULP) – 31
  • XTO Energy (XTO) – 31

When I compare the charts of individual Oil & Gas stocks and the “ranking” of those stocks as a percentage of the total IBD 100 list, I see an inverse , albeit imperfect, correlation. That is, the number of these stocks to hit the list seems to increase and peak about two-three months ahead of the prices of the stocks themselves beginning to plateau. If the past is prologue, prices of Oil & Gas stocks could make another excellent move through March and April with a leveling off beginning in May.

The forces causing Oil & Gas stocks to plateau could coincide with what has become a fairly reliable leveling off and decline in the general market at the end of Spring and onset of summer.

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