Daily Stock Pick: February 7th, 2023

2022 was a huge year for energy stocks, but so far, in 2023, the sector’s performance has been underwhelming. The energy sector underperformed the broader market in January, with the Energy Select Sector SPDR Fund (XLE) returning just 2.8%. Thus far, February is off to a bad start, with the fund falling more than 4%. However, several Wall Street pros say the bull market for energy stocks still has room to run after some cyclical funds actually saw investors pull out cash last year.   

“Despite stellar returns in 2022 (+65%), energy sector ETFs still saw -$1.6bn in outflows. We have a favorable view based on valuation, light positioning, and strong commodity & equity fundamentals,” said Bank of America investment strategist Jared Woodard.

With the current conditions in mind, many market participants are seeking to beef up their position in energy with some undervalued names. Today we’ll look at a standout name from the energy sector that’s currently trading at a discount compared to industry peers.  

Most recently, HF Sinclair Co. (DINO) reported quarterly earnings at $4.58 per share, surpassing the consensus estimate of $4.20 per share. HF Sinclair had a return on equity of 27.56 percent, while their net margin was 6.59 percent. The stock’s 2.8% dividend is well covered by cash flows, with a low payout ratio of 18%. DINO is a good value with a PE ratio of 5 times compared to the US Oil and Gas industry average of 7 times.  

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