Energy-Related Sectors Have Shined On Investors The Past 15 Years
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View from the Observation Deck

  1. The returns featured in the chart make a compelling case for allocating a portion of one's investment portfolio to utility stocks, energy stocks and master limited partnerships (MLPs) on an ongoing basis.
  2. All three outperformed the S&P 500 for the 10- and 15-year periods ended 9/28/12.
  3. MLPs (energy distribution and storage) posted the best showing by outperforming the S&P 500, S&P 500 Utilities Index and S&P 500 Energy Index in every time period in the chart except for the past year.
  4. Why own all three energy-related markets?
  5. From 1997-2011 (15 calendar years), the Alerian MLP Index outperformed the other two a total of 7 calendar years. The S&P 500 Utilities Index and Energy Index each outperformed the other two in 4 calendar years.
  6. In 1998, 1999 and 2001, two of the three energy-related markets were either essentially unchanged or down, while the third provided positive double-digit total returns.
  7. Energy spending moves up and down over time just like most areas of the U.S. economy. 
  8. Here are some data points, including the high and low, capturing energy spending as a % of personal consumption since 1962 (Bureau of Economic Analysis): 7.2% (Q1'62); 9.3% (Q2'81); 4.0% (Q1'02); 6.8% (Q3'08); and 5.8% (Q2'12).

This chart is for illustrative purposes only and not indicative of any actual investment. The illustration excludes the effects of taxes and brokerage commissions or other expenses incurred when investing. Investors cannot invest directly in an index. The following are unmanaged indices: S&P 500 is a capitalization-weighted index comprised of 500 stocks used to measure large-cap U.S. stock market performance; S&P 500 Utilities Index, S&P 500 Energy Index are also capitalization-weighted indices which include stocks from the S&P 500 Index in each respective sector; and Alerian MLP Index is a capitalization-weighted composite of energy master limited partnerships.

Posted on Thursday, October 11, 2012 @ 3:43 PM

These posts were prepared by First Trust Advisors L.P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.