After a strong start to the year, one sector is still near bear-market territory.
The energy sector is down 18 percent from its 52-week high, edging close to the 20 percent threshold that delineates a correction from a bear market.
Raymond James chief investment strategist Jeffrey Saut says sector weakness has presented an opportunity.
"My father used to always tell me that cheap stocks tend to do very well, and when the upstream master limited partnerships blew up, people sold everything. They sold the midstream and they sold the downstreams," Saut said on CNBC's "Trading Nation" on Monday.
As crude prices plummeted from mid-2014 to early 2016, mega-cap upstream companies involved in the exploration and production of oil tumbled and took out the rest of the XLE energy ETF. Over that period, Chevron tanked 37 percent and Exxon Mobil declined 22 percent.
Three years later, the energy space has still not recovered. The XLE ETF remains 36 percent below its June 2014 record high.
"The overall energy sector is trading at the same valuation metrics it was when oil was $26 a barrel and oil is $56 a barrel," said Saut.
Energy earnings grew by 104 percent in 2018, but their market performance did not mirror that growth. The XLE ETF plummeted 21 percent to end 2018, its worst year since crude prices were in free fall in 2015. The ETF traded at around 15 times trailing earnings when crude hit $26 in February 2016, a slightly higher valuation than current levels.
That has made one group in the sector look particularly attractive to Saut.
"The midstream MLPs are like transportation companies without wheels. They own the pipes and the storage, and they don't have much price sensitivity to crude oil. What they care about is flows," he said.
Of the group, Saut says Enterprise Products Partners is best of breed. It has roared 48 percent from its early 2016 bottom. It remains 32 percent off its records set in September 2014.
Disclosure: Saut owns Enterprise Products Partners shares.