As for my portfolio, June was looking pretty good, then yesterday happened. Worst relative performance day in 2 years. The US Government announced that it would allow the export of partially refined crude oil, and US refiners got hit. Two articles:
- Refiners Sink On U.S. Oil Export Threat
- Shares of U.S. Oil Refiners Tumble on Move Over Crude Exports
Sadly, this hits a concentrated area of my portfolio, which has a concentration in oil refiners. That concentration has benefited my clients in the past. So what to do now?
I do nothing. I find many refiners, particularly those that I own, to be attractive at present levels, and at slightly lower levels, I will start to buy more of the refiners.
I knew this issue was out there, and I think the reaction was overdone, as said Fadel Gheit:
Oppenheimer’s Mr. Gheit said the selloff in refiners’ shares is an overreaction, but added that the news has increased investors’ focus on the sector. “My phone hasn’t stopped ringing today,” he said.
“The market is extrapolating this one step to mean this is a prelude to lifting the oil-export ban,” he added. “It’s a knee-jerk reaction, on a very little bit of information.”
The correct reaction to most sudden market moves is nothing. Sit back, and analyze what the opportunity is relative to current prices, and if you conclude that your opportunities are markedly worse at current prices, sell some. If opportunities are better at current prices, buy some.
I suspect I will buy more of the refiners over the next month, and I think I will do well with the position. Refiners are less cyclical than they used to be, and their low valuations are unwarranted. Also remember, many of these refiners have significant hedging operations; they are not just floating at spot.
So I do nothing at present, and I am not crying, nor compelled to action after a bad relative performance day.