The SPDR S&P Oil & Gas Exploration & Production ETF (XOP) had outperformed the S&P 500 by about 89% as of early June. Four weeks later, the fund is underperforming the index by nearly 25%. Spot prices for natural gas are down by about 25%, West Texas Intermediate crude oil is down by more than 14%, and copper is down about 24%.
Commodity prices tend to take a beating when the economy slows (or a recession is threatening) because supply outruns demand. That historical trend may not be a good model for what is going on right now, however, according to Wells Fargo Securities’ analysts Nitin Kumar, Hanwen Chang and Rosalie Chen.
The analysts say that this time is different. The underperformance of U.S. exploration and production (E&P) stocks may have been overdone.
With this background, Wells Fargo reiterated its top picks in the E&P industry.
The post Wells Fargo Slices & Dices 5 US Oil & Gas Stocks originally appeared at 24/7 Wall St.