As
concerns
swirl
about
lofty
valuations
in
the
stock
market
and
investors
focus
on
AI
companies,
strategists
at
Berenberg
see
one
sector
as
a
relative
bargain:
energy.
The
global
energy
sector
is
trading
around
record
low
valuations
relative
to
the
broader
market,
according
to
the
German
investment
bank.
“The
US
and
European
energy
sectors
now
trade
at,
or
near,
all-time
lows
relative
to
the
market
across
various
valuation
metrics,”
said
Jonathan
Stubbs,
Berenberg’s
equity
strategist,
in
a
note
to
clients
on
Mar.
14.
“On
a
global
basis,
energy
trades
at
relative
valuation
levels
only
seen
three
times
in
the
past
40
years:
the
late
1980s,
2000
and
2020.”
The
bank
pointed
out
that
investors
in
oil
and
gas
stocks
on
those
three
occasions
outperformed
the
market
by
an
average
of
108%
–
or
more
than
doubled
their
money
–
from
the
depressed
valuation
levels.
The
bank
used
a
proprietary
metric
based
on
a
combination
of
price-to-earnings
multiples,
dividend
yields,
and
price-to-book
multiples
to
determine
the
sector’s
valuation.
It
also
noted
that
the
European
oil
and
gas
sector,
in
particular,
is
discounted.
“The
European
energy
sector
has
never
been
this
cheap
on
trailing
price/book
multiples,
both
on
an
absolute
and
relative
basis,”
the
bank
said.
For
investors
looking
to
increase
their
energy
exposure,
Berenberg
named
five
stocks
—
Shell
,
TotalEnergies
,
Harbour
Energy
,
Saipem
,
and
Energean
—
as
their
“top
picks.”
All
five
stocks
are
traded
in
the
U.S.
over
the
counter
or
on
an
exchange
as
dual-listed
shares.
Aside
from
valuations,
Berenberg
also
suggested
that
fundamentals
support
owning
energy
stocks.
“High
levels
of
cash
generation,
alongside
additional
support
from
better-than-market
balance
sheets,
should
help
underpin
total
shareholder
returns,”
Stubbs
added.
He
expects
this
cash
generation
to
fund
continued
share
buybacks,
especially
among
larger
companies.
The
bank
also
views
energy
as
a
potential
“geopolitical
hedge”
given
tight
global
oil
supplies
due
to
conflicts
in
the
Middle
East
and
the
Russia-Ukraine
war.
“Tight
energy
markets
are
likely
to
underpin
oil
prices
and
support
an
improving
earnings
backdrop
for
the
energy
sector,”
the
Berenberg
analyst
said.
“We
view
exposure
to
energy
equities
as
one
potential
way
of
hedging
geopolitical
risk.”
