Energy stocks have strengthened over the past month, but they curiously still trail the remarkable increase in oil prices. Even with crude oil prices up 61% this year, analysts at J.P. Morgan think the U.S. economy can “support” another 66% increase without a significant detriment to consumers’ financial health.Read: Stock market can absorb $130 oil, JPMorgan’s Kolanovic says
But over the past month, the S&P 1500 energy sector has been keeping up, with a 15.4% return as WTI has risen 14.6%. Energy stocks are still cheap “Energy offers attractive risk/reward with improving fundamentals, increasing capital return, as well as low valuation relative to the market and relative to its credit ,” Lakos-Bujas wrote.
But over the long haul, energy stocks have tended to trade higher than the broad index. Over the past 10 years, the average forward P/E for the S&P 1500 energy sector has been 19.8, or 119% of the full index’s 10-year average forward P/E of 16.6. For 15 years, the energy sector’s average P/E has been 17, or 110% of the full index’s average forward P/E of 15.5.
In order to present an energy -stock screen with a broad base, we began with the Russell 3000 Index RUA, which represents about 98% of U.S. stocks by market capitalization.
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