Excerpt from Barron’s quoting DataTrek’s Nick Colas:
…. “The energy sector’s share of the overall market is smaller than it has been historically, but its valuation isn’t cheap, due to recent downward revisions in earnings estimates. Nicholas Colas of Datatrek suggests in a Wednesday report that energy investors should look beyond price and valuation for other narratives to decide on a strategy for the sector.
The back story. Energy stocks currently represent 5.4% of the S&P 500’s total market capitalization. According to Colas, that’s way down from an average weighting at 9.6% since 2000. “Energy sits at unusually low weightings–ones that ‘should’ only occur in 2.5% of the time,” wrote Colas.
Oil prices doesn’t seem to be the reason for energy’s low weighting. West Texas Intermediate crude closed at about $63 a barrel on Tuesday. Historically, when prices are near $60 per barrel–in bull or bear commodity markets–energy stocks have made up a larger part of the S&P 500 index than they do today. For example, according to Colas, 8.8% in July 2015, 14.4% in November 2008, 12.6% in May 2009, and 8.4% in December 2014″….
Read the full article here on Barron’s!