Evaluating Energy and Extraction Sector in S&P 500

Listed below are the companies in the Energy & Extraction sector within the S&P 500 Index, ranked in order of valuation attractiveness. Currently, the Energy & Extraction sector has the highest median Value Score of all sectors according The Applied Finance Group’s April 2009 Monthly Market Review and looks to be trading at a significant discount relative to its historic valuation.

All Energy Companies (S&P 500) Ranked By Valuation Attractiveness

Energy Sector - Relative Valuation Chart

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The graph above shows the median percentage upside for the Energy sector relative to the overall market across time. Values greater than 1 indicate the sector is more undervalued than the market, while values less than 1 indicate the opposite. The red line identifies the historical median value to provide a basis to understand valuation levels relative to historic norms. This example illustrates that the median Energy company is undervalued relative to the market currently and has been trading at a significant discount to its historic relative valuation, indicating a potentially attractive opportunity.

Comments

[GMiki1:]

Interesting. My take is that nat gas has to rise over time--no pun intended. Oil, too, of course.

Apr 28 01:36 PM

[ed233:]

It seems to me that this graph is somewhat misleading. Prior to the economy tanking the energy sector was experiencing a bullish trend and the basic fundamentals like supply and demand played a less influencing factor than political factors and weather related problems. Therefore the bias for the energy sector was more above the median range artifically in relation to supply and demand. With destruction of the demand principals due mainly to a contraction of business activity and a declining employment picture then, the funadmentals of demand still rule the day until there are some concrete signs of a turn around in the economy. At the present time the global economy is still contracting and that means a reduced need for an increasing supply of fossil fuels. You would still think that this is going to place pressure on the down side for energy related companies at least in the short term. LOL Looking after your money.

Apr 28 04:30 PM

[richjoy403:]

Ah! the same old question phrased yet again...do we buy what others are selling, or buy what others are buying?

Does it occur to anyone that the correct answer can be both!...Not being a day-trader, buy some of each in maintaining a diversified portfolio.

Apr 29 11:15 AM