It's getting pretty ugly out there for the S&P 500. There are still places to make money — but if you're like most investors — you likely don't own much of them.
XTen stocks in the S&P 500, almost entirely widely under-owned energy firms like Halliburton (HAL), Schlumberger (SLB) and Exxon Mobil (XOM), are up more than 12.5% from the S&P 500's closing peak on Jan. 3, says an Investor's Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith.
Gains that big are hard to find this year. Less than a month into the year, the S&P 500 is already down 6.5%. And the SPDR Portfolio S&P Growth ETF (SPYG), chock full of the stocks driving the market in most of the past years, finally slipped into a correction. It's down 10% from the S&P 500's high. Investors lost more than $3.5 trillion just this month, says Wilshire Associates.
"It's been a rocky start to 2022 for investors," says Bespoke Investment Group. "We still have a ways to go in January, but the performance month-to-date ... is among the worst since ... back in the early 1980s."
Shunning Energy Is Hurting You Now
There's absolutely no surprise where S&P 500 investors are moving their money: Energy. But if you're like most people, you hardly own stocks in this winning sector.
Nine out of the 10 top-performing S&P 500 stocks from the index' high hail from the energy sector. And yet, energy is such a hated S&P 500 sector it's a tiny percent of many investors' portfolios. The energy sector only accounts for 3.3% of the most popular ETF in the world — ranking it a distant eighth among the 11 S&P 500 sectors. Energy is an even smaller holding, 2.4%, in the Dow Jones Industrial Average.
Some of the hate of S&P 500 companies is creating puzzling distortions in the market. Energy giant Exxon Mobil is valued at $309 billion — roughly half of computer chipmaker and ESG darling Nvidia (NVDA). Even so, Exxon Mobil is expected to make $22.6 billion in 2020, as much as Nvidia is seen in posting in revenue this fiscal year and double its profit.
But investors distaste of energy is reversing. Shares of Exxon Mobil are up more than 15% from the S&P 500's high. Should you buy Exxon Mobil stock now?
Looking At S&P 500 Energy
Owning S&P 500 energy stocks may be unpopular. But it's profitable. And some of the gains are well into double-digit percentages already this early in the year.
Halliburton, a Houston-based seller of equipment to the oil and gas industry, has seen its shares soar more than 17% from the S&P 500's peak. Investors are piling in ahead of what's expected to be a banner year for profit. Analysts think the company's profit will jump more than 60% in 2021 on nearly 5% higher revenue of $15.1 billion. The company reports 2021 results on Jan. 24.
And shares of Halliburton peer, Schlumberger are up more than 16% from the S&P 500's high. And its profit in 2021 is seen jumping more than 86% to an adjusted $1.27 a share. The company reports 2021 results on Jan. 21.
It's honestly hard to not make money on S&P 500 energy stocks this year. Not a single S&P 500 energy stock is down from the S&P 500's high.
And that ties into another trend: Many value stocks are making a powerful run. The only top 10 S&P 500 non-energy stock this year so far is another value stock: embattled video-game maker Activision Blizzard (ATVI). It's up more than 20% from the S&P 500's high thanks to a multi-billion buyout by Microsoft (MSFT).
Finding ways to sidestep the S&P 500's mounting pain is getting more difficult. More than 70% of the stocks in the S&P 500 are now down this year — and many by staggering amounts.
Maybe energy isn't looking so bad now.
Top S&P 500 Stocks From The Market's High
Energy stocks dominate top-performing stocks from the S&P 500's Jan. 3, 2022 closing high
| Company | Ticker | Stock % ch. from S&P 500 high | Sector |
|---|---|---|---|
| Activision Blizzard | (ATVI) | 21.3% | Communication Services |
| Halliburton | (HAL) | 17.3 | Energy |
| Schlumberger | (SLB) | 16.8 | Energy |
| ConocoPhillips | (COP) | 16.1 | Energy |
| Hess | (HES) | 15.9 | Energy |
| Exxon Mobil | (XOM) | 15.3 | Energy |
| Pioneer Natural Resources | (PXD) | 15.0 | Energy |
| EOG Resources | (EOG) | 13.5 | Energy |
| Phillips 66 | (PSX) | 12.9 | Energy |
| Occidental Petroleum | (OXY) | 12.5 | Energy |
| SPDR S&P 500 ETF Trust | (SPY) | -6.5% |
Sources: IBD, S&P Global Market Intelligence from Jan. 3, 2022 S&P 500 closing high to Jan. 20, 2022
Follow Matt Krantz on Twitter @mattkrantz
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