“Regardless of an interest rate hike or not, investors looking to own an energy ETF should be prospecting XLE. Again, post-Brent $39 capitulation, XLE should be throwing off a higher yield, it should be pricing at generational lows, and the underlying holdings that comprise the top 10 tickers by concentration (comprising 60% of the ETF’s valuation) will not be at risk of any structural failure. That juxtaposition of pricing to structural integrity should be arbitraged. Usually, and I believe this to be the case with XLE in this instance as well, capitulation offers deep value that isn’t found but at the farthest ends of the sentiment spectrum,” according to a Seeking Alpha post.
Profit expectations have fallen dramatically which in turn has pushed the sector’s P/E ratio much higher even as stock prices have declined, though P/Es have come off their highs and estimates appear to have stabilized,” according to AltaVista.
Investors appear to be warming to the idea of embracing energy ETFs again as highlighted by XLE’s third-quarter inflows of over $393 million.
Energy Select Sector SPDR
