- 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.
For further details see:
Energy Sector Recovery On Solid Footing