2 Undervalued Energy Stocks That Are Rising Fast

Oil ETFs to Buy

The vaccines are changing everything. The notion of ending this pandemic and unleashing a full recovery in 2021 is even bringing energy stocks back from the dead. If the vaccine can bring these sorry stocks back to life, ending the pandemic should be easy.

Since the first vaccine announcement about a month ago, the Energy Select Sector Fund (XLE) has rallied 33%. That’s a huge move for a fund of many stocks in just a month. The powerful stock market recovery had excluded energy until now. The emergence of energy as the top-performing sector is a major market rotation that is changing the game.

Energy had been by far the worst-performing sector of the market during the pandemic, down 50% YTD at the end of October. But it was also the worst-performing market sector going into the pandemic. Before anybody ever heard of the coronavirus, energy had been the worst-performing market sector for every measurable period over the past 10 years.

The market hated energy stocks for a reason. The massive new supply of oil and gas produced by the American energy revolution caused an oversupply and a crash in global energy prices. As a result, the profitability of many energy companies suffered. That situation will still persist long after this pandemic becomes nothing but an unpleasant memory.

And there’s something else. Fossil fuels are dirty and increasingly archaic. Alternative or clean energy is the wave of the future. The clock is ticking on the death of fossil fuels.

The market loves alternative energy and hates oil and gas. Just look at the performance of alternative energy companies like Tesla (TSLA). To the market, clean energy will inherit the future and fossil fuels are becoming a relic of the past.

That said, oil and gas aren’t going out of style any time soon. Fossil fuels still account for about 80% of U.S. energy consumption, and a higher percentage than that in the rest of the world. The full recovery, already being priced in by the market, cannot occur without a sizable increase in demand for oil and gas, and increasing profitability for energy companies.

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