Investors extremely pessimistic for energy shares

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Written by Sebastian Wanke | 12 January 2015
Posted in Special research

While the feebleness of oil prices continues, sentix Sector Sentiment for European energy shares falls again to an all-time low. Taken face value, this is a positive sign for the future performance of the sector's stocks. But it does not look as if energy shares could reach more than a temporary stabilisation in the coming weeks – their current price behaviour is just too weak.

In January, sentix Sector Sentiment for European energy shares decreases from -1.50 to -1.70 standard deviations (see background below). With this, the indicator reaches a new all-time low. Its downward trend dating from last summer remains perfectly intact (see graph).

The sentiment for the oil and gas sector now stands at such a low level that it has to be interpreted in a contrarian manner. It thus sends a buying signal. Actually, the probability of a rebound for the prices of energy stocks has increased.

However, the absolute as well as the relative performance of the sector's shares tell a different story. They do not give any hint for a change for the better so far. This is why we only expect a temporary stabilisation of the index for European energy shares over the next weeks.

20150113 sector sentiment engl

Background

sentix Sector sentiment is a monthly survey being conducted since 2002 among individual and institutional investors via the internet. The survey is – since October – run around the second Friday of each month. Investors are asked about their six-month expectations regarding 19 European stocks sectors. They can indicate whether they expect a sector to outperform, to perform as the market or to underperform. The survey results are normalised over all sectors and calculated as so-called z-scores. Z-scores are standard deviations from the mean of a given sample. A value of +1 for a sector sentiment then means, for instance, that the expectations for the sector stand one standard deviation above the mean expectation for all sectors.

The current sentix Sector Sentiment survey was conducted from January 08 to January 10, 2015. 1,000 individual and institutional investors took part in it.

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