Insight & action

Ways to "Energize" Your Portfolio

We are "energizing" our portfolio for the second time in two weeks:

--On May 15 we highlighted a report from Ned Davis Research which noted energy companies beat first quarter earnings estimates by the highest margin of all sectors in the S&P 500 Index.

--Today we provide a follow-up: Energy stocks have the highest growth and lowest valuation of all groups in the S&P 500 Index.

This morning's inspiration comes from a technical strategist Chris Verrone, who identifies three energy breakout charts in his note "Twenty Stock Ideas for the End of the Week." They are Exxon Mobil Corp. (XOM), Hess Corp. (HES) and Occidental Petroleum Corp. (OXY).

Chris got us thinking about why energy stocks are breaking out now, after earnings. So we ran the numbers and the reason became crystal clear. Again, energy stocks have the highest growth...

And energy stocks have the lowest valuation...

We sorted the 44 companies comprising the S&P Energy Sector Index by growth, keeping only those forecast to grow at least 18 percent (three times faster than the S&P 500 Index). We then narrowed the list to companies whose stocks trade cheaper than the overall market average of 16.5 times earnings. Eight companies made the cut: Baker Hughes Inc. (BHI), Chesapeake Energy Corp. (CHK), Devon Energy Corp. (DVN), Marathon Petroleum Corp. (MPC), Noble Corp. PLC (NE), Philips 66 (PSX), Tesoro Corp. (TSO) and Valero Energy Corp. (VLO).

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