Energy stocks could pull a Tesla and go parabolic in 2021, Fundstrat's Tom Lee says
stockscould go parabolic this year and trade like Tesladid in 2020 as investors experience FOMO, Fundstrat's Tom Lee said in a note on Thursday.
- The trade is playing out so far in 2021. The S&P 500 Energy Index is up 13% year-to-date, while the broader S&P 500 has climbed less than 1%.
- With the sector making up just 2.5% of the S&P 500, few investors have exposure to energy stocks, according to Lee.
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The energy sector fell 37% in 2020 and briefly saw oil prices dip into negative territory as the COVID-19 pandemic and ensuing travel restrictions sparked a collapse in demand. Over the same time period, Tesla soared 743% as the company managed to barely miss its 500,000 full-year delivery goal by only a few hundred cars.But energy stocks are already starting to stage a rebound, with the sector up 13% year-to-date, while the broader S&P 500 has climbed less than 1%, Lee points out. On top of that, few investors have exposure to energy stocks, with the sector making up just 2.5% of the S&P 500.
"If this happens, energy stocks could go parabolic in 2021," Lee said.Energy stocks could be supported by a decline in supply growth due to potential regulations from President-elect Joe Biden, Lee said, adding that demand is set to recover as a global economic recovery materializes. "The re-alignment of the supply/demand outlook for Energy is the most dramatic of any sector," Lee explained.
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