Energy stocks have room to go higher, even after a wild run this year, says one strategist.
“They’re still cheap if you look at it on most metrics,” Tortoise portfolio manager Rob Thummel told Yahoo Finance Live this week.
“The market is really rewarding companies that have positive earnings and free cash flow. That’s what this sector has,” said Thummel,” I still think there’s room for it to continue, even if oil prices stay the same, or even if they fall a little bit.”
Thummel says the biggest driver for energy stocks going forward is the yield they offer investors.
The S&P 500 Energy Select ETF (XLE) is up 53% year to date, by far the best performer among the 11 sectors.
However oil prices have been declining recently, with Brent futures hovering below $80 per barrel and WTI sitting around $74.
“Right now China is driving oil prices. What we’ve seen is obviously the concern of the China reopening being delayed,” said Thummel. “When that growth returns you’re going to have oil prices probably go higher.”
He also notes oil inventories worldwide are low.
“You’re going to see more and more demand going forward for oil, and there is just not a lot of extra supply coming online in the next couple of years,” he added.
Ines is a markets reporter covering stocks from the floor of the New York Stock Exchange. Follow her on Twitter at @ines_ferre
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