With oil prices rallying sharply since the end of last year, it would be natural to expect energy-sector stocks to be tearing the roof of the market. But they’re not — and investors are starting to notice.
The J.P. Morgan analysts noted that while oil had recovered around 60% of its fourth-quarter drawdown through late last week, large-capitalization exploration-and-production, or E&P, firms were still down 25% since Oct. 31, while small-cap E&Ps were off 53% . “There’s much skepticism among investors” over energy shares, which is reflected in the discrepancy between the year-to-date gains for WTI and the energy sector, said Terry Sandven, chief equity strategist at U.S. Bank Wealth Management, in a phone interview.
Consensus expectations are for the sector to post a 20.9% drop in earnings year-over-year, the second-weakest any sector after materials stocks, noted Sam Stovall, chief investment strategist at CFRA, in a Monday note. Colas sounded a cautious note. He acknowledged that the sector’s low weighting relative to its long-run history would normally make him bullishly “pounding the table on that statistic alone,” but argued that “this is a tougher call than just saying ‘the group’s weighting in the S&P 500 is half of what it should be, so buy it.’”
MktwSaefong Cause oil prices are bubbly
the oil price is trending up in an orderly manner. it is not soaring by any means, therefore the headline is misleading.
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