Are Energy Stocks and ETFs Still a Buy After the Rally?

• (1:00) - What Should Investors Know About The Differences Between Brent and WTI?
• (5:10) - What Impact Will The War Have On Refinery Products?
• (8:15) - Breaking Down The Current Performance of Energy Subsectors
• (14:00) - How Long Could We Expect This War To Continue and What Impact Will It Have On Crude Oil
• Prices?
• (19:10) - Will We See More Investments Into U.S. Energy Companies?
• (22:30) - Where Should Investors Be Looking To Gain Exposure Within The Energy Industry Right Now?
• (29:35) - Episode Roundup: USO, XLE, VDE, XOP, OIH, AMLP, COAL

Podcast@Zacks.com

In this episode of ETF Spotlight, I speak with Stacey Morris, head of energy research at VettaFi, about oil and energy ETFs, which are among the best performing areas of the market this year.

The Middle East conflict has severely disrupted global energy markets, with Iran restricting flows through the Strait of Hormuz, a critical corridor for roughly 20% of global oil exports.

Brent crude, which is a global benchmark, soared 63% in March, whereas WTI jumped about 51%. We discuss the difference between the two popular crude benchmarks and why WTI usually trades at a discount to Brent crude.

Some regional crude benchmarks have hit record highs, and prices for physical deliveries have risen even further. While the US is somewhat insulated from the oil shock thanks to the shale boom, many Asian and European economies that rely heavily on imported energy are already feeling a lot of pain.

US consumers are more impacted by soaring prices for refined products like gasoline, diesel, or jet fuel. The average price of gasoline in the US has now topped $4 a gallon. The surge in diesel, which is used by trucks and freight trains, will impact food prices.

Energy was the best performing sector in the first quarter, up about 37%. These stocks and ETFs had actually done quite well even before the war started as traders were bearish on oil heading into the year. They benefited from better than feared oil prices, as well as developments in Venezuela and rotation out of mega cap tech stocks.

ETFs like the State Street SPDR S&P Oil & Gas Exploration & Production ETF (XOP) and VanEck Oil Services ETF (OIH) are now up more than 40% year to date and have outperformed the broader State Street Energy Select Sector SPDR ETF (XLE).

With the recent rally, Exxon Mobil (XOM) is now trading at a forward price to earnings ratio of about 20X, and has topped that of AI darling NVIDIA (NVDA) twice this year, per the WSJ. Should investors buy these stocks and ETFs after these gains?

Energy stocks get a lot of attention whenever there is some sort of energy crisis, but investors are usually under allocated to them. Should they be used as a hedge against any oil shock, an inflation hedge, for diversification, or for the attractive dividend yields?

Tune in to the podcast to learn more.

Be sure to look out for the next edition of ETF Spotlight, and remember to subscribe!

If you have any comments or questions, please email podcast@zacks.com

Boost Your Portfolio with Our Top ETF Insights

Zacks' exclusive Fund Newsletter delivers actionable information, top news and analysis, as well as top-performing ETFs, straight to your inbox every week.

Don’t miss out on this valuable resource. It’s free!

Get it now >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Exxon Mobil Corporation (XOM): Free Stock Analysis Report

NVIDIA Corporation (NVDA): Free Stock Analysis Report

State Street Energy Select Sector SPDR ETF (XLE): ETF Research Reports

State Street SPDR S&P Oil & Gas Exploration & Production ETF (XOP): ETF Research Reports

VanEck Oil Services ETF (OIH): ETF Research Reports

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research