Tom Lee of Fundstrat Global Advisors has predicted that energy stocks, which have up until now been the worst-performing in the market, have bottomed out. This means that they are in a position where they can fall no further and have a real chance of improving.
Currently, energy stocks are known as a ‘style orphan’ – that is to say that they aren’t cheap enough for value investors but don’t perform well enough for growth investors. In other words, they don’t make a very desirable stock option. It could well be for this reason that the S&P 500 energy market is down over 9% this year while the S&P 500 overall is up around 12%.
It has been suggested by a futures curve that oil supplies are tightening up after years of oversupply. This could well signify that oil price recovery is intact, which Lee notes: “Almost always drives a rally in Energy equities”. And, although the market is heading towards a time when the norm is to see the prices of crude oil drop, Lee is still backing his prediction of an energy rebound.
Fundstrat, in keeping with its belief on energy stock, examined 27 value stock names to see which ones looked like they would be characterised by rising share prices or have a bullish future. The list of stocks that did well under its quantitative and technical analyses includes Pioneer Natural Resources, Concho Resources, EOG Resources and ConocoPhillips.
This is certainly an area to keep an eye on if you are interested in the future of energy stock markets.