In early 2021, Dubravko Lakos-Bujas was one of the rare bulls in energy stocks. After these stocks soared nearly 50%, this JPMorgan Chase & CoStrategists say there is room for further gains.
Oil and gas producers are among the best performers in the S & P 500 this year, with both Devon Energy Corp. And Marathon Oil Corp. More than doubling. But bearish bets on energy stocks are also rising as investors remain sceptical about such stocks. Lakos-Bujas and his team point out that this disgust contrasts sharply with the improved outlook for the industry, which will lead to higher valuations and share prices catching up with fundamentals.
"We expect the industry to be reassessed as companies issue strong results and improve guidance, and reiterate their focus on shareholder return on capital rather than unprofitable market share growth," the strategists wrote in a client report on Thursday. "at a time when most assets are generally revalued due to falling interest rates and abundant liquidity, energy stocks still have several years of non-linear earnings growth potential. And the current valuation is attractive. "
According to JPMorgan Chase & Co strategists, low profitability and strict environmental policies have led to underinvestment for years, leading to supply shortages, which intensified during the epidemic. They say there is now a reason for the energy sector to continue to outperform.