Cheap … cheaper … energy stocks

With the publication of robust earnings from tech bellwethers Microsoft and Alphabet yesterday, the result season appears to progress pretty much according to expectations so far. Consensus believes S&P 500 earnings will be down some 6% during the quarter. In terms of valuation, US tech does not look particularly attractive compared to the market and its own 30 years history. However, energy stocks remain a clear out layer as they currently trade at a 40% discount to the market overall. US energy stocks have been cheaper less than 5% of all the considered periods over the last 30 years. We therefore believe energy remains one place to look at for investors searching for undervalued businesses.