Don't judge utilities too simply: Citi's Tobias Levkovich

In a topsy-turvy investment environment, utilities have been among the sexiest sectors—up 16 percent in the first half of 2014.

Tobias Levkovich, Citigroup's chief U.S. equity strategist, told CNBC on Tuesday the returns made sense from a certain point of view.

"I think everybody likes to think of the world in very simplistic terms. You know, rates go up, rates go down, stocks do the following," he said on "Halftime Report," "I don't think anybody would've expected a better economy and consumer discretionary to be the worst-performing sector in the S&P, and nobody would've expected health care to do well in the first half of the year in an environment where people are buying cyclicals.

"So, these very simplistic approaches, I think, are just flawed."

Levkovich said that factoring in price-earnings ratios correctly was key.

"If you looked at valuation work—not where's the P/E of the stock relative to where they've been historically, but when P/Es are high, what do utility stocks do? They tend to outperform," he said.

Levkovich holds "buy" ratings on technology, utilities and real estate investment trusts.

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As for the best second-half plays, Levkovich didn't argue that utilities would necessarily continue their strong showing.

"I'm not telling you utilities are going to be the greatest stocks in the second half," he said. "What I am suggesting is that the way people try to just pigeonhole things is so simplistic that if it was that easy, we'd all be billionaires."

By CNBC's Bruno J. Navarro.