The Secret Energy Trade Investors Are Ignoring

Energy has been one of the worst-performing sectors in the S&P 500 during the past year.

 

While the broader market is up an impressive 13%, the energy sector has gained just 2.5%. That performance looks even worse when compared with the market’s most bullish sectors, with health care up 29% and so-called consumer defensive stocks (which include makers and retailers of food and household and personal goods) up 23%.

But overall weakness in energy stocks is masking a lone group of standouts from the lackluster sector: refineries.

In fact, this group of stocks hasn't just been strong relative to its energy peers -- it has been one of the best-performing industries in the entire market in the past year. Take a look at the chart of two leading companies.

 

This growth is being driven by a phenomenon known as the crack spread. 

 

The crack spread is the profit a refiner can expect to realize from converting a barrel of oil into gasoline. This spread has been extremely profitable in the past year because of a profound divergence in the price of Brent crude from Norway and West Texas Intermediate crude. (more)

 

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