Some value traders may be betting on a recovery in energy stocks and sector-related exchange traded funds after crude oil prices plunged to seven-year lows.
The Energy Select Sector SPDR (NYSEArca: XLE) has attracted almost $1.3 billion in net inflows over the past week, according to ETF.com, after the fund declined 20.2% year-to-date. [A Bottom Might be in for Energy ETFs]
A growing minority of Wall Street strategists anticipate a pickup in oil prices next year and are recommending energy stocks as a way to play a rebound, reports Caroline Valetkevitch for Reuters.
In a recent Reuters poll, seven of 25 strategists cited energy as their contrarian pick for 2016 or expected a surprise upside in oil and energy next year, pointing to integrated oil companies as best situated to capitalize on the turn.
“I’ve been doing this for 33 years and virtually any time I’ve seen anything as hated as energy is today … it tends to be a pretty good investment if you can hold it for six to 12 months,” Robert Phipps, a director at Per Stirling Capital Management, told Reuters.
The strategists are taking a contrarian position after West Texas Intermediate crude oil futures hit a seven year lows and currently hovers around $34.91 per barrel or down more than 65% since July 2014. [Big Banks Defend Energy Stocks]
“There’s an awful lot of bad news priced into energy and oil at the moment,” Leo Grohowski, chief investment officer at BNY Mellon Wealth Management, told Reuters. “We would use this as more of an entry point than an exit point for areas like big oil and the oil services area.”