Last week I shared the Apollo “Margin of Safety” chart on Pepsi (see articles) and noted how it, specifically and Consumer Staples as a sector (AKA “HALOS” – an acronym I heard coined by Joshua Brown in a recent and excellent podcast) are trading at a historically large premium to Value. That premium reflects risk aversion to AI and a broad rotation out of Tech and high‑beta names.
Energy has been a major beneficiary of that rotation. Defensive flows have pushed money into the sector, and performance has followed. But momentum alone isn’t an investment thesis.
Unless we’re about to enter an unprecedented era of structural growth for Energy (and I’m not saying we are not), the Margin of Safety suggests this may be as good as it gets. When the Value Indicator (lower chart) hits ~80%, the historical downside:upside ratio is roughly 4:1 – a poor reward-to-risk setup for new buyers.
Really good salespeople put clients into positions when the odds are in their favour (upside:downside ~4:1. Think July 2022, April 2025 as shown by the Value indicator score at the time). The even better ones tell clients when those odds flip and back it up with evidence.
The upside: if Energy truly begins a new era of growth, Value will catch up to price and that reset will create evidence-based buying opportunities. Until then, time to ask: are you riding momentum or managing risk?