Investors still love Kathy Wood, but hate the best sector of the year

Blood spurted the market this past week, as Walmart (WMT) posted its worst week, down 20%.

In the midst of the killings, investors piled on beat names like Arc Innovation ETF (ARKK) while avoiding the best performance sector of the year. The energy sector’s staggering 47% return this year came from rising oil and gas, as WTI crude oil futures (CL = F) rose 56% this year.

Still, investors have jumped from iShares US Energy ETF (XLE) to $ 705 billion – the largest such fund in the world – reflecting the roughly $ 730 billion investors working in Kathy Wood’s flagship disruption fund, down 55% in 2022.

Earlier this week, Saudi Aramco (2222.SR) – now ahead of the world’s most valuable public company Apple (AAPL) – reported a record quarterly profit of $ 39.5 billion.

We’ve also learned that Warren Buffett planted another .9 25.9 billion in Chevron (CVX) and $ 7.74 billion in Occidental Petroleum (OXY) in the first quarter – making Chevron his # 4 holding. Buffett’s stock of Berkshire Hathaway (BRK-B) has avoided market sales and is fairly flat over the year.

In a recent Yahoo Finance Plus webinar, Etoro USA investment analyst Callie Cox broke down the fundamentals of the U.S. energy sector that have driven this outperformance.

“[E]Referring to the geopolitical concerns arising from the Russia-Ukraine war, Cox said nergy is now a bit of a wild card. Away from Russian sources.

Despite the outsourced performance of energy companies this year, the valuation metrics – such as the price-to-earnings ratio – are still low. It is relatively recent after years of injuries and traumas.

Occidental Sports, for example, trades at a PE ratio of around 9 and up 115% this year, while Exxon Mobil (XOM) trades at a slightly more expensive, 15 times next year’s earnings. According to Yahoo Finance, the components of XLE collectively carry only 4.3 PE multiple.

Fuel companies generally benefit from higher oil prices, so investors could theoretically hold longer or add more exposure to the sector, Cox notes. But Cox is somewhat embarrassed by the Ukraine war – which could affect the supply side of the resolution. “It makes me a little hesitant,” Cox said.

Jared Blikre is a reporter who focuses on the market of Yahoo Finance Live. Follow him @SPYJared.

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