My Green Zone Power Ratings system loves energy stocks right now.
It’s not ideological… and it has virtually nothing to do with the war in Iran.
The system had been flagging large swaths of the energy sector as “Bullish” or “Strong Bullish” long before “Hormuz” became a household name.
And it was right.
Even in a market totally dominated by the AI trade, energy is still the top performing sector by a wide margin this year, up 38%.
Now let’s dive into the X-Ray to see who’s leading the pack — and who’s lagging behind…
Now that is a bullish sector if I’ve ever seen one.
Of the 19 energy stocks I track, 15 rate as “Bullish,” meaning a score of 60 or higher out of 100. (For those new to my system, “Bullish” rated stocks outperform the S&P 500 Index by double on average over the following year.)
Three more rate as “Neutral,” meaning my system would expect them to perform more or less in line with the broader market. And only one rates “Bearish,” meaning my system would expect them to significantly underperform the market.
Suffice it to say, my system likes energy…
Let’s dig deeper to find out why.
Where Does Energy Pick Up Points?
The Green Zone Power Rating system is a composite score based on six primary factors: momentum, size, volatility, value, quality and growth, each of which comprises several sub-factors. (As we are looking at large-cap constituents of the S&P 500, I don’t consider size when doing the sector X-ray.)
So, where do energy stocks pick up the most points?
In short, “everywhere.”
A majority of energy stocks rate as “Bullish” on each of the five factors. There isn’t a single factor where I can say the sector rates poorly.
But here’s where the real fun starts…
Even after ripping higher by almost 40% this year, the sector still rates exceptionally well on its volatility factor. 18 out of the 19 rate as “Bullish.” An equal number rate as “Bullish” on their quality factor too.
We’re about to enter the volatile September – October window when the market often exhibits wild swings. High-quality, low-volatility stocks are exactly the ones you’d want to own in that kind of environment.
Only the Best
I also ran a customized screen of “Bullish” rated energy stocks that have outperformed their sector ETF by at least 5% over the past three months while showing greater relative strength over the past three-month and 12-month windows. I also added some additional screens to guarantee sufficient liquidity.
Here’s what my system gave me:
These names should look familiar…
These three refiner stocks were some of the top performers yesterday, and they’ve consistently popped up on “Bullish” screens throughout the year.
And not only do they rate as “Bullish” across all factors… they rate as “Strong Bullish.”
Valero Energy (VLO), as I noted yesterday, has been in the Green Zone Fortunes portfolio for close to two years… and we’re already up 160% in the shares.
There are no guarantees in investing, of course. But this is about as overpowered a list as I’ve ever seen. With or without a resolution in Iran, each of these three is priced to perform.
To good profits,
Adam O’Dell
Editor, What My System Says Today
