SPDR Energy And S&P E&P ETFs: Not As Headline-Dependent As You Think, Still Pricing In Sub-$70 Oil

Elliott Gue 6.35K Followers Follow Summary Energy Select Sector SPDR and SPDR S&P Oil & Gas E&P ETF are rated strong buys, with valuations reflecting long-term oil prices near $67.50/bbl—well below current spot prices. Year-to-date, XLE and XOP have shown their weakest correlation to oil prices since 2007, decoupling from short-term geopolitical headline risk and speculative futures positioning. Recent trading history demonstrates energy stocks are not simply proxies for oil; they have not fully priced in oil’s rally and have shown resilience during oil’s sharp declines. Upside remains significant for XLE and XOP if oil sustains $75–$80/bbl; downside risk is limited unless oil returns to sub-$60/bbl levels, which current fundamentals do not support. Alones Creative/iStock via Getty Images This year, by far the most common pushback I’ve received from investors regarding bullish energy stock ideas involves headline risk. The notion that oil prices, currently trading over $92/bbl, are one news headline, or one social media post, away This article was written by Elliott Gue 6.35K Followers Follow Elliott Gue knows energy. Since earning his bachelor’s and master’s degrees from the University of London, Elliott has dedicated himself to learning the ins and outs of this dynamic sector, scouring trade magazines, attending industry conferences, touring facilities and meeting with management teams. For seven years, Elliott Gue shared his expertise and stock-picking abilities with individual investors through a highly regarded, energy-focused research publication. Elliott Gue’s knowledge of the sector and prescient investment calls prompted the official program of the 2008 G-8 Summit in Tokyo to call him “the world’s leading energy strategist.” He has also appeared on CNBC and Bloomberg TV and has been quoted in a number of major publications, including Barron’s, Forbes and the Washington Post. In October 2012, Elliott Gue launched the Energy & Income Advisor (www.EnergyandIncomeAdvisor.com), a semimonthly online newsletter that’s dedicated to uncovering the most profitable opportunities in the energy sector, from growth stocks to high-yielding utilities, royalty trusts and master limited partnerships. Roger Conrad also contributes analysis of master limited partnerships and Canadian energy stocks to the publication. The masthead may have changed, but subscribers can expect the same in-depth analysis and rational assessments of investment opportunities in the energy sector. Analyst’s Disclosure: I/we have a beneficial long position in the shares of FANG,SM,XOP either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.