Investor Jeff Gundlach may be best known for his bond bets, but he has been talking about commodities as one of the market's best trades since the beginning of the year.
On Monday he revealed a specific trade for what he sees as an underappreciated opportunity in the energy sector.
Speaking at the Sohn Investment Conference, where many managers disclose their latest investment ideas, the founder and CEO of DoubleLine Capital said he bought shares of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP) because he thinks energy stocks have not yet received the full benefit of the crude-oil rally.
"It's lagged in a way that's kind of bizarre this year," Gundlach told CNBC on the sidelines of the conference. "It's not a very great performing sector, and yet oil has gone up towards $70 a barrel."
Gundlach continued: "If you look historically at the energy sector versus the S&P 500, not surprisingly it's correlated with movements in oil. That hasn't happened this time, and I think there's a catch-up there. The charts look good on XOP, the exploration and production part of the sector."
The chart is arguably better for XOP than some other broad energy ETFs. The iShares Dow Jones US Oil and Gas Exploration and Production (IEO) is up 21 percent in the past year, versus only 11 percent for XOP. WTI crude oil is up by about 25 percent in the past year. So far in 2018, IEO is up more than 8 percent — best among U.S. energy sector ETF bets — while XOP is up a little under 5 percent. That performance gap may represent where there is more money left to be made in oil and gas companies.