Up nearly 20 percent in the past five months, the energy sector still has room to run, Matarin Capital Management's Nili Gilbert said Monday.
Rising inflation would be harmful for some stocks, making it important to hedge that risk with specific energy picks, she said on CNBC's "Halftime Report."
"The stock market tends to be more forward-looking, more anticipatory, whereas the spot markets may move on day-to-day current events," said Gilbert, Matarin co-founder and portfolio manager. "We think energy is a good investment, not only because of our positive outlook but also because of the rising prices generally."
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Gilbert said there are three things to look at when investing in energy.
First, she said, companies need to be focused on selling oil directly into markets, not using crude as input into products.
"If you're using crude as inputs and oil prices are rising, your margins will shrink," Gilbert said.
Avoiding geopolitical risk is another way to play it safe in a bullish energy market, according to Gilbert.
"We like companies operating in stable regions like the U.S, Canada and Norway," she added.
Lastly, Gilbert suggested focusing on oil as an energy investment rather than gas because "natural gas markets tend to be so local that you almost need to be a political forecaster to find hedges there, whereas oil prices tend to rise around the world together."
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Her two energy stock picks were Marathon and Basic Energy Services, both of which she said are two large holdings in her fund.
Basic Energy is an oil & gas services company whose stock is up 75 percent year-to-date, logging a return of over 100 percent in the past 12 months. She said Matarin Capital is "careful when investing in momentum stocks, but what gives us comfort is an attractive valuation, the company's free cash flow generating capabilities and actually the fact that the company has a good amount of leverage."
Marathon is an exploration and production company whose stock rose 12 percent year-to-date.
"Marathon is doing most of its business in stable regions like the U.S, Canada, Norway," Gilbert said. "And it's doing most of its business in oil rather than gas. We like Marathon because of its attractive valuation and also because it is an efficient business."
Correction: This story has been updated to reflect Nili Gilberg's correct stock pick, Marathon Oil.
— By CNBC's Cassandra Jaramillio