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Owning almost anything in the U.S. stock market has been a losing proposition since September. Owning smaller energy companies has been a catastrophe.
Hercules Offshore Inc. and Resolute Energy Corp. (REN) are among 19 oil-and-gas equities in the Russell 2000 Index that lost more than half their market value over six weeks. Plunging oil prices fueled losses after production jumped and the dollar strengthened, dragging the Russell energy sub-index down 36 percent since the end of August.
?Just months ago these were must-own stocks and now they?re toxic waste,? Eric Cinnamond, manager of the $724 million Aston/River Road Independent Value Fund, said by phone from Louisville, Kentucky. ?Supply came on and eventually created lower prices. From a macro picture, people see a big red sell button and just keep on pressing.?
Energy companies have tumbled as oil futures entered bear markets, pushed down by the highest U.S. output since 1986 amid rising shale supplies and concern that Europe is approaching another recession. The rout was extended yesterday after the International Energy Agency said oil demand will expand this year at the slowest pace since 2009.
The selloff is taking a particular toll on hedge funds with concentrated bets on the industry. They own about 14 percent of energy shares in the Russell 2000 Index (RTY), compared with 8.8 percent for the S&P 500, data compiled by Bloomberg show.
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