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Quarter-End Insights

Energy: Most Undervalued Sector Heading Into the Quarter

Oilfield services look particularly attractive.

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The Morningstar US Energy Index continues to underperform the market, rising just 5.7% versus the overall domestic market’s 9.0% gain in the fourth quarter (Exhibit 1). Through 2019, the sector displayed more volatility than the market and ended with a 10% gain over the prior year, trailing the market’s 31% return. While investors have remained pessimistic on oil and gas stocks in 2019, the recent (albeit slight) uptick reflects a 13% increase in spot prices for West Texas Intermediate over the quarter (Exhibit 3).

U.S. energy index lags the U.S. equity index. - source: Morningstar

Dave Meats does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.