“Profit expectations have fallen dramatically, which in turn has pushed the sector’s P/E ratio higher even as stock prices have declined. Obviously momentum isn’t in the Energy sector’s favor, but stocks appear attractive in terms of valuation if–and this is a big if–the depressed profitability (Return on Equity) forecast for this year and next is temporary, rather than a ‘new normal’ reflecting abundant new supplies from shale,” said AltaVista in a new research note.
Although likely coincidental, the reiteration of that bullish call on XLE comes at an interesting time because February marks the beginning of the energy sector’s most favorable seasonal trends. Dating back to 1999, the first full year of trading for the sector SPDR ETFs, XLE is usually the top performer in the second month of the year with an average February gain of almost 2%. [Sector ETF Ideas for February]
Energy Select Sector SPDR
