Optimism on a Big Energy ETF

With another solid showing on strong volume Tuesday, the Energy Select Sector SPDR (NYSEArca: XLE), has climbed more than 4% over the past week, bring its year-to-date to just over 1%.

That is not enough to erase the memory of XLE’s 2014 futility when it was the only one of the nine sector SPDR ETFs to close the year with a loss, but this could be the time when bold calls on beaten energy stocks are rewarded. That includes an overweight rating on XLE from AltaVista Research.

AltaVista’s overweight rating implies above average appreciation potential. “Typically, funds in this category consist of stocks trading at attractive valuations and/or having above-average fundamentals,” according to the research firm.

AltaVista has recently been consistent on XLE, initially revealing the overweight rating on the ETF two months ago, stating at the time “Profit expectations have been deteriorating rapidly as oil prices have fallen, and OPEC’s recent decision to maintain production levels is confirmation that larger supplies from America’s shale oil & gas revolution means lower energy prices–great for consumers but a threat to the long-term profitability of Energy firms. The Energy sector appears attractive in terms of valuation, but momentum isn’t currently in the sector’s favor.” [A Gutsy Call on an Energy ETF]

As a new normal for the energy sector potentially comes to pass, AltaVista sees opportunity with XLE, the largest equity-based energy ETF.