DDG - Energy Sector Recovery On Solid Footing

• XLE has risen ~50% since its October 29 low, and in the process, looks to have formed a solid base despite still-widespread pessimism over the outlook for the sector.
• Despite the strong gains, the Energy sector's share of total U.S. market cap remains minimal, far below the level that has historically been associated with current oil prices.
• This discount relative to long-term averages is reflected in the fact that the dividend yield on the MSCI USA Energy index remains ~4x higher than the rest of the market.
• Even if the bears are correct and the oil industry is in terminal decline, it looks as though oil stocks are already priced attractively enough to compensate for this.

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