Throughout the first five months of this year we have heard endless stories about how gas has been hitting record highs even though Memorial Day and the peak driving season was ahead of us. The implication was that things were only going to get worse once the Summer started. With a 25% year to date return, the oil service stocks have certainly benefited from this theme. However, if we look at the historical performance of the index since its inception in 1997, we see that while this year's gain is above average, it is not completely out of the norm.
Based on their average performance since 1997 (the first year of price data for the oil service index), the group has typically rallied ahead of Summer. However, in a typical 'buy the rumor, sell the news' manner, once the peak season arrives, the group's performance for the rest of the year is not nearly as impressive. We would note however, that just like trading in the commodity itself, the results are volatile. As an example, in 1997, the group rose by 34% from June 1st through August 31st, while in 1998, it declined by 54%.
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