Backtested 9 years of energy stock to test lead lag thesis , sharing the findings with an example
Disclosure: I don't own GNK. This is more to share methodology and findings. Not advice, Do your own research.
Findings: When energy ETFs spike, under-followed small caps lag by 1-4 weeks.
With oil whipping around on Iran headlines, sharing a backtest based off energy sector. generally the big energy ETFs (OIH, XLE, XOP) spike immediately, but small cap energy stocks take approx 1 to 4 weeks to catch up. I spent quite a bit of time mapping this out with 10-K filings and backtesting. Sharing one of the stocks as an example.
My thesis was that liquid proxies (ETFs, futures) price in news instantly since they are followed closely by the big boys. But under followed small caps esp. those with lss analyst coverage don't. But in most cases this gap closes over ~20 trading days.
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An Example: GNK (Genco Shipping) vs BDRY (Dry Bulk Futures ETF)
GNK keeps the majority of its fleet on spot market rates. Per the 2025 10-K (filed Feb 18, 2026): 21 vessels on spot voyage charters, 4 on spot time charters, and 18 on fixed time charters as of Feb 17, 2026. BDRY tracks dry bulk freight futures. When freight futures rip, GNK's stock lags because of a 4-8 week GAAP accounting delay revenue is recognized over voyage duration (load-to-discharge), not at booking. By the time revenue hits the income statement, the futures already moved.
Backtest Setup:
1. BDRY up >3% over last 10 trading days
2. GNK has lagged BDRY by >3% over same window
3. Buy GNK next open, sell 20 days later
4. 10-day cooldown between trades
Backtest (2018-2026):
| Metric | Value |
|--------|-------|
| Trades | 42 (4.7/yr) |
| Win Rate | 71.4% |
| Avg Return | +6.8% per trade |
| Best Trade | +46.0% |
| Worst Trade | -20.3% |
| Profitable Years | 7 of 9 |
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GNK was one of the candidates because after reading its the 10-K. A few things jumped out:
Read the 10-K (filed Feb 18, 2026). A few things jumped out:
- 25 of 43 vessels on spot charters (58%) as of Feb 2026. Management actively chooses spot exposure over locking in long-term rates.
- Revenue is recognized over the voyage (load-to-discharge). Brazil-to-China iron ore = 30-40 days loaded + ballast positioning. This creates a structural 4-8 week lag between rate moves and reported earnings.
- They trade FFAs (forward freight agreements) themselves the same futures BDRY tracks. Management is watching the same instrument.
- $55.8M in drydocking costs in 2025 (up from $20.6M in 2024). 11 drydocks planned for 2026, 14 for 2027. These compress earnings even when rates are strong.
- 6-7 analysts cover it. Not zero, but few enough that the lag persists.
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GNK is one of 6 energy lead-lag stocks I've backtested across the same 9-year window. Combined stats:
| | Trades | Win Rate | Avg Return |
|---|--------|----------|------------|
| GNK vs BDRY | 42 | 71.4% | +6.8% |
| Stock#2 | 27 | 77.8% | +9.3% |
| Stock #3 | 39 | 74.4% | +4.5% |
| Stock #4 | 53 | 73.6% | +15.9% |
| Stock #5 | 42 | 71.4% | +4.6% |
| Stock #6 | 36 | 69.4% | +10.1% |
| **Portfolio** | **239** | **72.8%** | **+8.9%** |
The other 5 cover different energy sub-sectors: oil services, nat gas, ethanol, uranium, and mineral royalties. Same methodology find the structural reason for the lag in the 10-K, confirm with backtest, non-overlapping trades only.
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Some things to note though:
- **Backtest =/= live.** Slippage, spreads, and emotional execution will eat into returns. Small-cap spreads are wide.
- **Not every year is great.** 2018 and 2024 were below-average for GNK. Signal isn't magic it's a statistical edge.
- **Non-overlapping trades only.** If you see someone claim 360 "signals" per year from a daily indicator, they're counting overlapping windows. I only count trades you'd actually take.
- **These are small caps.** Thin liquidity.
- **Past performance etc.** You know the drill.
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