Energy Stocks Are Lagging Behind Oil Prices. How to Ride the Trend?
Energy equities have struggled to keep pace with soaring oil price. The $S&P 500(.SPX)$
The correlation between the S&P 500 Energy index and WTI has dropped from over 70% in June to roughly 28% for much of September, indicating that investors are uncertain about the sustainability of the oil rally given concerns about the economy. "Rather than chasing the rally in energy stocks, retail investors are currently exhibiting caution," Vanda Research analysts led by senior vice-president Marco Iachini wrote.
Wall Street Remains Bullish
Luckily for the oil and gas bulls, FactSet has reported that Wall Street analysts were most upbeat about the energy sector, which has the highest percentage of "buy" ratings, at 64%.
How to Take Advantage
Some investors see an imbalance in the market, between the U.S. major oil companies and some companies with slightly lower valuations.
"The much cheaper oil and gas shares are trading at much lower stock prices at comparable oil prices because they are still too tiny for the larger pools of money to consider," Bill Smead, chief investment officer of Smead Capital Management, wrote in a note this week.
He says the big oil companies might have to buy the smaller ones to capitalize on this disparity, and argues that investors can take advantage by buying the undervalued stocks now.
@TigerStars @CaptainTiger @Daily_Discussion @TigerWire @Tiger_chat @Tiger_comments
Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.
