Energy has gone nowhere in the past decade, and it could get worse before it gets better

VIDEO3:5903:59
Energy has gone nowhere in the past decade, and it could get worse

Energy is the worst-performing sector over the past decade.

The S&P 500 sector has moved 2% higher since the end of 2009, essentially flat compared with the 182% run higher for the broader market. The group is also the worst performer this year.

"If you look at the XLE [energy ETF] it's been so unenthusiastic on the year, overall," said Bill Baruch, president of Blue Line Capital, on CNBC's "Trading Nation" on Thursday. "What I'm more worried about is seeing this market break down below here and stay contained through here. So if we see this stay contained, this is tightening up, we're going to get a directional move at some point very, very soon."

"For now, I want to be a buyer when this thing washes out., I'm expecting a washout, and it could be in the first quarter of next year, and that's where I'm going to wait and be the buyer," said Baruch.

John Petrides, portfolio manager at Tocqueville Asset Management, is more positive on the group for its fundamentals.

"A lot of it was focused on where the price of energy is going, but the underlying company fundamentals are actually quite healthy. And if you look at post-2016 when the price of oil collapsed, many of the super majors, you know the top of the stack, … have really had their a-ha moment, and what they've been doing is focusing on returning cash to shareholders, they're cutting back capital expenditures in response to oversupply in the market. They're growing their dividend," Petrides said during the same segment.

The XLE ETF yields 3.7%, higher than the 1.9% average on the S&P 500. The group trades at 16.6 times forward earnings, below the forward multiple for the rest of the market.

"From a fundamental standpoint, this is clearly the one sector that has lagged; I do think valuations are attractive," said Petrides.

Disclaimer