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The Worst Sector for Investors in the First Half of 2013

http://www.fool.com/investing/general/2013/07/07/the-worst-sector-for-the-first-half-of-2013.aspx

Matt DiLallo
July 7, 2013

It was a great first half of the year for many investors, as the market, as measured by the S&P 500, was up by about 10%. The health-care sector led the way, appreciating by 19.1%. Even investors in slower-growing sectors such as utilities (up 7.7%) and energy (up 8.6%) did well.

But even though all sectors were positive, not all investors felt the market's lift evenly. The one sector that wasn't very kind to investors was the materials sector, which squeaked by with the lowest appreciation at 1.7%. Many stocks in the sector simply got crushed. Let's look at what went wrong.

Hint: Following the yellow brick road didn't lead anywhere good. Source: Gold Footpath by George Hodan.

Gold stocks have been hit particularly hard so far this year. Investors in gold miners such as Goldcorp (NYSE: GG) and Yamana Gold (NYSE: AUY) have been crushed, with the stocks down by 34% and 45%, respectively. The big culprit here is that gold has completely lost its luster with investors. The shiny metal fell to a three-year low of under $1,200 an ounce. In the second quarter alone, the price of gold dropped by more than $400 an ounce, a 25% plunge. The following chart shows just how bad it's been for gold miners.

AUY Chart

AUY data by YCharts

Gold investors weren't the only ones having a rough year. Other commodities such as silver and copper have been sinking this year as well, sending top stocks such as Silver Wheaton (NYSE: SLW) and Freeport McMoRan (NYSE: FCX) down by double digits. Again, looking at the chart, you can see a pretty big correlation between falling commodity prices and the subsequent fall in the price of each stock.

New York Silver Price Chart

New York Silver Price data by YCharts

Many of these companies were hit by a one-two punch, as falling commodity prices were magnified by company-specific issues. Freeport, for example, spent most of the year working to close its transformative oil and gas deals. The company was also hurt by a collapse at one of its top mines, which forced it to shut down production. Meanwhile, Goldcorp endured project start-up delays at its Cerro Negro mine in Argentina. Even silver streamer Silver Wheaton was hurt by a project start-up delay as the company, which has a silver streaming agreement for the Pascua-Lama mine in Chile, was hit by that mine's water issue delay. The mining industry as a whole has been riddled by both cost overruns and start-up delays, which have really hi